The Department of Homeland Security (DHS) U.S. Customs and Border Protection (CBP) published a notice of proposed rulemaking in the Federal Register , (84 FR 30634 June 27, 2019), proposing to exempt portions of the system of records from one or more provisions of the Privacy Act because of criminal, civil, and administrative enforcement requirements. DHS issued the “DHS/CBP-009 Electronic System for Travel Authorization (ESTA) System of Records” in the Federal Register at 84 FR 30746 on June 27, 2019, to provide notice to the public that (1) DHS/CBP is expanding the categories of individuals to clarify the use of ESTA at all ports of entry; (2) to clarify that this system covers records obtained on the Form I-94W “Nonimmigrant Visa Waiver Arrival/Departure Record,” the paper version of ESTA; (3) to clarify that the ESTA application includes questions about travel to any Department of State-designated state sponsor of terrorism, and that DHS/CBP will no longer list the specific countries; (4) to specify that all ESTA vetting results and derogatory information in the Automated Targeting System (ATS); (5) to clarify and expand several previously issued routine uses; (6) to clarify that this system contains records or information recompiled from or created from information contained in other systems of records that are exempt from certain provision of the Privacy Act; and (7) to expand the applicability of the previously issued exemptions from the Privacy Act.

DHS/CBP invited comments on both the Notice of Proposed Rulemaking (NPRM) and System of Records Notice (SORN).

DHS received one comment on the NPRM and no comments on the SORN.

CBP received one comment on the published NPRM regarding the collection of biometrics by the U.S. Government generally, and not specific to the ESTA system of records. CBP appreciates the public comment and strives to be transparent regarding all traveler operations. After consideration of the public comment, CBP has determined that the exemptions should remain in place and will implement the rulemaking as proposed.

For the reasons stated in the preamble, DHS proposes to amend Chapter I of Title 6, Code of Federal Regulations, as follows:

The Department of Homeland Security (DHS) U.S. Customs and Border Protection (CBP) published a notice of proposed rulemaking (NRPM) in the Federal Register (8 FR 30632 June 27, 2019) proposing to exempt portions of DHS/CBP-022 Electronic Visa Update System (EVUS) System of Records from one or more provisions of the Privacy Act because of criminal, civil, and administrative enforcement requirements. DHS issued the “DHS/CBP-022 Electronic Visa Update System (EVUS) System of Records” in the Federal Register at 8 FR 30751 on June 27, 2019, to provide notice to the public to (1) clarify that the EVUS enrollment information includes questions necessary to evaluate whether a covered alien's travel to the United States poses a law enforcement or security risk, and to make administrative changes to remove references to the specific EVUS application questions and data elements; (2) provide additional transparency that vetting results are retained in ATS; (3) expand the previously issued exemptions to clarify that DHS/CBP is exempting certain portions of records in this system from provisions of the Privacy Act of 1974 because of criminal, civil and administrative enforcement requirements; and (4) to add new Routine Uses and clarify previously issued ones.

DHS/CBP invited comments on both the (NPRM) and System of Records Notice (SORN).

DHS received no comments on the NPRM and no comments on the SORN. DHS will implement the rulemaking as proposed.

For the reasons stated in the preamble, DHS amends Chapter I of Title 6, Code of Federal Regulations, as follows:

Executive Summary A. Need for the Regulatory Action

The purpose of this regulatory action is to incorporate by reference into the NRC's regulations the latest revisions of three regulatory guides (RGs). The three RGs identify new, revised, and reaffirmed Code Cases published by the American Society of Mechanical Engineers (ASME), which the NRC has determined are acceptable for use as voluntary alternatives to compliance with certain provisions of the ASME Boiler and Pressure Vessel (BPV) Code and ASME Operation and Maintenance (OM) Code currently incorporated by reference into the NRC's regulations.

The three RGs that the NRC is incorporating by reference are RG 1.84, “Design, Fabrication, and Materials Code Case Acceptability, ASME Section III,” Revision 38; RG 1.147, “Inservice Inspection Code Case Acceptability, ASME Section XI, Division 1,” Revision 19; and RG 1.192, “Operation and Maintenance Code Case Acceptability, ASME OM Code,” Revision 3. This final rule allows nuclear power plant licensees and applicants for construction permits, operating licenses, combined licenses, standard design certifications, standard design approvals, and manufacturing licenses to voluntarily use the Code Cases, newly listed in these revised RGs, as alternatives to engineering standards for the design, construction, inservice inspection (ISI) and inservice testing (IST), and repair/replacement of nuclear power plant components. In this document, the NRC also notifies the public of the availability of RG 1.193, “ASME Code Cases Not Approved for Use,” Revision 6, which lists Code Cases that the NRC has not approved for generic use and will not be incorporated by reference into the NRC's regulations.

The NRC prepared a regulatory analysis (ADAMS Accession No. ML19156A178) to identify the benefits and costs associated with this final rule. The regulatory analysis prepared for this final rule was used to determine if the rule is cost-effective, overall, and to help the NRC evaluate potentially costly conditions placed on specific provisions of the ASME Code Cases, which are the subject of this final rule. In addition, qualitative factors to be considered in the NRC's rulemaking decision are considered in the regulatory analysis. The analysis concluded that this rule would result in net savings to the industry and the NRC. Table 1 shows the estimated total net benefit relative to the regulatory baseline, the quantitative benefits outweigh the costs by a range from approximately $6.34 million (7 percent net present value (NPV)) to $7.20 million (3 percent NPV).

In this final rule, the Department of Energy (DOE) establishes procedures for the designation of critical electric infrastructure information (CEII) under section 215A(d) of the Federal Power Act (FPA). Section 61003 of the Fixing America's Surface Transportation Act (FAST Act), Public Law 114-94, added section 215A to the FPA. The new section authorizes both the Secretary of Energy (the Secretary) and the Federal Energy Regulatory Commission (FERC) independently to designate CEII. Under section 215A(d)(1) of the FPA, a CEII designation exempts the data or information so designated from disclosure under the Freedom of Information Act (FOIA) and other laws requiring government disclosure of certain information or records. 16 U.S.C. 824o-1(d)(1); 5 U.S.C. 552(b)(3). Section 215A(d)(2) required FERC, after consultation with the Secretary and within a year of the FAST Act's enactment, to “promulgate such regulations as necessary to . . . establish criteria and procedures to designate information as [CEII].” 16 U.S.C. 824o-1(d)(2). FERC did so, following a notice-and-comment rulemaking similar to the instant rulemaking. Order No. 833, Regulations Implementing FAST Act Section 61003—Critical Electric Infrastructure Security and Amending Critical Energy Infrastructure Information; Availability of Certain North American Electric Reliability Corporation Databases to the Commission, FERC Docket Nos. RM16-15-000 and RM15-25-001, 157 FERC ¶ 61,123 (2016), order on reh'g & clarification, Order No. 833-A, FERC Docket No. RM16-15-001, 163 FERC ¶ 61,125 (2018). While this rulemaking established criteria for designating CEII applicable to both FERC and the Department, the designation procedures in the rulemaking were limited to FERC. Thus, on October 29, 2018, the Department published a Notice of Proposed Rulemaking (NOPR) to establish its own designation procedures. (83 FR 54274) This final rule establishes DOE's designation procedures, which are consistent with the procedures established by FERC to the maximum extent possible.

The Department is committed to improving the resilience, reliability, and security of the Nation's electricity delivery system. Consistent with its statutory authorities and ongoing work with energy sector entities in furtherance of that mission, the Department anticipates that the majority of CEII the Department will receive will be voluntary submissions, scoped in collaboration with the submitting entity, and for which DOE may often make a CEII designation based on the scoping prior to submission. DOE's role with respect to CEII is not expected to be related to its regulatory functions, and DOE expects that nearly all potential CEII sent to DOE will be voluntary submissions tied to specific programs. The Department anticipates receiving a smaller volume of CEII material than FERC does given the regulatory requirements for mandatory FERC filings by the electricity industry, giving DOE the flexibility to engage in more proactive designations. Even if the submission relates to a DOE regulatory function, DOE will still evaluate it based on the procedures set forth in this rule on whether to designate the information as CEII. If organizations and individuals submit material to DOE, the Department recommends adding all appropriate FOIA exemption markings, as the material may be both Confidential Business Information (CBI) and CEII. Based on the recent opinion of the Supreme Court of the United States in Food Marketing Institute v. Argus Leader Media (No. 18-481), which effectively broadens the scope of data and information that are eligible for the fourth exemption from disclosure under FOIA, DOE notes that all entities submitting information for CEII designation under this rule should also specify whether the material is Confidential Business Information under the new legal standard.

DOE received a total of fourteen (14) written comments in response to the NOPR, all of which are available at https://www.regulations.gov. Generally, the comments addressed the following issues: Scope, purpose, and definitions; authority to designate information as CEII; coordination among DOE Office designators; criteria and procedures for determining what constitutes CEII; duration of designation of CEII; sharing of CEII; and sanctions for unauthorized disclosure of CEII. DOE responds to the comments received in the discussion of the final rule in Section II below.

After FERC published its CEII designation criteria and procedures, DOE began its rulemaking to establish administrative procedures regarding how the Department would designate, protect, and share CEII. The Department follows the designation criteria FERC has already formulated, but establishes its own procedures for such designation in this final rule. These procedures differ from those established by FERC in that DOE's procedures provide additional time to coordinate with parties that submit CEII to DOE. However, the agencies' overall procedures are similar in providing specific information when requesting that submitted information be designated as CEII, as well as procedures for appealing a CEII designation determination. The Department's rule is consistent with FERC's rule to the maximum extent possible, so that the fundamental objectives of the CEII statutory program will be met regardless of whether the information is submitted to the Department or to FERC.

The Canadian Electricity Association (CEA) expressed support for DOE's effort to harmonize its CEII procedures with FERC's CEII procedures. (CEA, No. 12, p. 4). However, CEA asked for clarification between DOE and FERC's CEII procedures. In particular, CEA sought understanding on processes to ensure consistency between CEII designation, as well as removal of CEII designation, if the same material is shared with both DOE and FERC. Id.

The Department recognizes the importance of coordination among Federal agencies with similar programs, as each agency has different procedures related to voluntary information sharing and protection of the information. As mentioned above, the Department has sought to harmonize its procedures with the FERC procedures as much as possible, and DOE will use FERC's designation criteria. The Department's designation, however, does not mean that the information will be automatically shared with FERC, the Department of Homeland Security (DHS), or any other Federal agency. The Department will follow the procedures outlined in this rule to review and designate information and data as CEII. In addition, the Department will continue to coordinate with the DHS regarding its Protected Critical Infrastructure Information program, including as provided for under 1004.13(e)(4). If DOE finds it necessary to provide CEII material to another Federal agency, DOE will provide dissemination instructions prohibiting further distribution. DOE will continue to coordinate with FERC, DHS, and other Federal agencies on all cross-cutting initiatives related to CEII to ensure maximum harmonization.

Proposed § 1004.13(a) tells interested stakeholders where to find information about CEII filing procedures and guidance. No comments were received; therefore, DOE finalizes this section as proposed.

As described in proposed § 1004.13(b), procedures for the designation, protection, and sharing of CEII developed under section 215A of the FPA would apply to anyone who provides CEII to DOE or who receives CEII from DOE, including DOE employees, DOE contractors, agents of DOE, and individuals or organizations who have been permitted access to CEII, as well as non-DOE entities submitting CEII to DOE or receiving CEII from DOE. These proposed procedures would also apply to other Federal agencies seeking CEII designation and protection of information that agencies may submit to DOE.

The joint comments of EarthJustice, Union of Concerned Scientists, and Public Citizen (EarthJustice et al. ) disputed the validity of the Department's notice and comment process in this rulemaking. Their comments alleged that the Department violated the Administrative Procedure Act because it held a meeting in February 2018 (discussed in footnote 1 of this rule) at which “industry stakeholders” laid out concerns in advance of this rulemaking. EarthJustice et al. stated that “[t]he public cannot meaningfully comment on an agency's action if key facts or rationale in support of the decision are not made available for consideration and comment.” (Earth Justice et al., No. 3, p. 13).

The Department disagrees with EarthJustice et al.' s claims of inadequate notice and comment. As explained in the October 2018 NOPR, the Department held a meeting with interested stakeholders in compliance with all applicable laws and procedures. 1 As a preliminary matter, DOE's ex parte guidelines, promulgated in October 2009 and available at https://www.energy.gov/gc/downloads/guidance-ex-parte-communications, provide that the applicability of the guidelines begins upon release of a NOPR or other preliminary rulemaking document. As noted in the Department's October 2018 NOPR, however, DOE nonetheless made a summary of that meeting available to the public, as specified in the ex parte guidelines. The NOPR subsequently provided regulatory text and a preamble explaining the proposed rule. Commenters were given 60 days to respond to the proposed rule, which is to be binding on the Department in designating CEII. No commenters asked for additional time to comment on the rule. This final rule includes the Department's consideration of, and response to, the comments it received. Based on the above, DOE concludes that commenters had the opportunity to meaningfully comment on the Department's proposed rule.

Section 1004.13(c) of the proposed rule defines terms applicable to the proposed procedures in this notice for the designation of CEII. Where the terms are defined by statute or by FERC's CEII regulations, the definitions track those corresponding definitions, either verbatim or with maximum consistency. Other terms are proposed for the first time in this context. The Department received no comments on the proposed definitions. Therefore, unless discussed below, the proposed definitions are adopted without change in this final rule.

The Department adds the definition of “Confidential Business Information” to § 1004.13(c) to mean “commercial or financial information that is both customarily and actually treated as private by its owner and that is provided to the government as part of a claimed CEII submission.” This addition is based on the June 24, 2019, opinion of the Supreme Court of the United States in Food Marketing Institute v. Argus Leader Media (No. 18-481). The decision effectively broadens the scope of data and information that are eligible for exemption from disclosure under 5 U.S.C. 552(b)(4). In the case, the Supreme Court rejected the lower courts' holding that “information can never be deemed confidential [the FOIA statutory term] unless disclosing it is likely to result in `substantial competitive harm' to the business that provided it.” Food Mktg. Inst. v. Argus Leader Media, No. 18-481, slip op. at 1 (U.S. June 24, 2019). The Court found that the “substantial competitive harm” test which stemmed from the D.C. Circuit's 1974 opinion in National Parks & Conservation Association v. Morton, 498 F.2d 765 (DC Cir. 1974), went beyond the language of the statute itself, and did not reflect the typical meaning of the words used when Congress enacted FOIA Exemption 4. See Argus Leader, slip op. at 7-10. The Court held that “[a]t least where commercial or financial information is both customarily and actually treated as private by its owner and provided to the government under an assurance of privacy, the information is `confidential' within the meaning of Exemption 4.” Id. at 12.

The Department clarifies that the CEII Coordinator may delegate the daily implementation of the CEII Coordinator function as described in this rule, in whole or in part, to an Assistant Secretary or Administrator in DOE. The NOPR stated that the final CEII designation authority would reside with the DOE Office exercising its delegated CEII designation authority. The appropriate Assistant Secretary or Administrator would exercise the authority delegated to a DOE Office. Therefore, the Department adopts a definition of CEII Coordinator in § 1004.13(c) to specify delegation to the appropriate Assistant Secretary in DOE.

Proposed § 1004.13(d) allows the Secretary, or DOE Offices with delegated authority, to receive and designate CEII. Practically speaking, the flexibility to delegate allows the Department to handle CEII in a manner ensuring access to the critical information it needs to execute its responsibilities as the lead Sector-Specific Agency for cybersecurity for the energy sector, under section 61003(c) of the FAST Act, and the Sector-Specific Agency for Energy (Critical Infrastructure), under Presidential Policy Directive 21.

EarthJustice et al. claimed that “[t]he Department has no legal authority to establish criteria and procedures for CEII designation.” The comments contended that “while both [FERC] and the Department have authority to designate CEII, the power to establish criteria and procedures for doing so is [FERC]'s alone.” (EarthJustice et al., No. 3, p. 2).

EarthJustice et al. are correct that both the Department and FERC may designate CEII. However, while the Department is obligated to apply the criteria FERC crafted, FERC acknowledged in its final procedural rule that DOE is not bound by the procedures FERC uses, noting that “[t]he FAST Act . . . does not compel DOE to make any changes to its regulations in this regard” and that “nothing within the Commission's regulations would limit DOE's ability to designate CEII in accordance with the FAST Act,” and specifically “declin[ing] to revise [its] regulations to identify specific designation criteria and CEII procedures for DOE.” FERC Order No. 833, 157 FERC ¶ 61,123 at P 39 (2016), reh'g denied, FERC Order No. 833-A, 163 FERC ¶ 61,125 at PP 31-33 (2018). See also Department of Energy Organization Act, as amended, section 644, 42 U.S.C. 7254 (“The Secretary is authorized to prescribe such procedural . . . rules and regulations as he may deem necessary or appropriate to administer and manage the functions now or hereafter vested in him.”). The Department has therefore designed its own CEII designation procedures, which are consistent with the FERC regulations to the maximum extent possible.

Other commenters requested more detail on how the Department will evaluate information submitted as CEII. For example, Midcontinent Independent System Operator, Inc. (MISO) noted that the proposed rules allowed the delegation of CEII designation authority. (MISO, No. 11, p. 3). Therefore, MISO recommended that “[t]he designation criteria must be specified to enable consistent designation of CEII by each DOE Office, and for CEII submitters to understand the kind of information the DOE will designate as CEII.” Id. Edison Electric Institute (EEI) recommended that, in clarifying the CEII designation criteria, “the Department consider information on other systems or assets that may negatively affect national security, economic security, and/or public health; information that may enable the misuse of an asset or system that may negatively affect national security, economic security, and/or public health; and information on systems or assets that has previously been made public.” (EEI, No. 9, p. 5).

DOE has determined that the existing CEII designation criteria address these concerns. FPA section 215A(a)(2) defines Critical Electric Infrastructure as “a system or asset of the bulk-power system, whether physical or virtual, the incapacity or destruction of which would negatively affect national security, economic security, public health or safety, or any combination of such matters.” FPA section 215A(a)(3) includes “information related to critical electric infrastructure” in its definition of CEII. Under the criteria that FERC established and that DOE follows, FERC and DOE may consider a range of elements in determining what qualifies as CEII. The regulation, as proposed, provides adequate guidance for a submitter and DOE staff to determine whether information is CEII, and for the CEII Coordinator or Coordinator's designee to make a determination.

EEI stated that it supported coordination among DOE Office designees to ensure that the FAST Act authorities are consistently implemented within DOE and recommends a robust internal process to ensure that CEII is appropriately and consistently designated, protected, and shared throughout the Department. (EEI, No. 9, p. 11).

DOE agrees that the internal process for coordination among DOE Office designees is important and will ensure robust internal controls to appropriately and consistently designate, protect, and share CEII throughout the Department. More information on the internal process is provided in Section F.

Proposed § 1004.13(e) sets out the functions of the CEII Coordinator and the Coordinator's designee. The CEII Coordinator may make an initial determination as to whether the information fits within the definition of CEII, but final CEII designation authority resides with the CEII Coordinator or DOE Office exercising its delegated CEII designation authority. The proposed subsection also provides that DOE entities with authority to designate CEII would meet to calibrate their approaches to CEII designation, and would meet with representatives of other Federal agencies, as needed and at the discretion of the Coordinator or designee, to ensure consistent understanding of CEII designation processes.

The Department clarifies that the CEII Coordinator or Coordinator's designee is delegated the authority already granted to the Secretary, in accordance with FPA section 215A, to designate information sought by DOE as CEII. Therefore, the Department amends § 1004.13(e)(1) to include specific mention that the CEII Coordinator or Coordinator's designee can designate certain information sought by DOE as CEII, in accordance with FPA section 215A(a)(3), and using the designation criteria codified at 18 CFR 388.113(c).

The Department clarifies that § 1004.13(e)(2) was not meant to limit coordination of implementation of DOE's CEII authority with only DOE Offices, PMAs, and the Energy Information Administration (EIA). It was meant to include all CEII Coordinator designees. Therefore, the Department amends § 1004.13(e)(2) to remove specific mention of the four PMAs and EIA.

The Department clarifies that a submitter requesting information be designated as CEII must clearly label the cover page and pages or portions of the information for which CEII treatment is requested in bold, capital lettering, indicating that it contains CEII, as appropriate, and marked “CEII-CRITICAL ELECTRIC INFRASTRUCTURE INFORMATION—DO NOT RELEASE.” The additional marking of spelling out CEII is meant to eliminate any confusion related to the use of the new FOIA exemption in DOE. Therefore, the Department amends § 1004.13(e)(2)(i) to include the updated marking of CEII as “CEII-CRITICAL ELECTRIC INFRASTRUCTURE INFORMATION—DO NOT RELEASE”

The Department clarifies that, based on the addition of the definition of “confidential business information,” when any person or entity requests CEII designation of submitted material, the submitter must also clearly label the cover page and pages or portions of information that it considers Confidential Business Information in bold, capital lettering, indicating that it contains Confidential Business Information, as appropriate, and marked “CONFIDENTIAL BUSINESS INFORMATION—DO NOT RELEASE.” In addition, if CEII and CBI are both included in the submission, the information should be marked “CEII-CRITICAL ELECTRIC INFRASTRUCTURE INFORMATION and CONFIDENTIAL BUSINESS INFORMATION—DO NOT RELEASE.” The Department therefore revises § 1004.13(e)(2) to add a new paragraph (ii) to include this additional requirement.

EEI supports the procedures that require the CEII Coordinator or the Coordinator's designee to notify CEII submitters of a non-federal entity request for CEII and to convene a conference call with the affected DOE Office(s) and the CEII submitter(s) to discuss any concerns with sharing the CEII. (EEI, No. 9, pp.11-12). However, EEI “recommends that the Department provide additional guidance to CEII submitters on what to expect from the CEII Coordinator or his/her designees when convening a conference call to discuss a non-federal entity request for CEII release.” Id. at 12. In particular, EEI requests clarity on whether a “conference call will be scheduled within five days of the request or within five days of when the submitter is notified of the request, and if the submitter will receive the § 1004.13(k) request before the conference call is convened.” Id. In addition, EEI supports the Department's proposed coordination with other Federal agencies but recommends that, “in addition to coordination with FERC, coordination with [DHS] under its Protected Critical Infrastructure Information (`PCII') and other information protection authorities and the Nuclear Regulatory Commission (`NRC') are critical” because each agency has different procedures related to CEII, and discussions identifying best practices related to voluntary information sharing and protection of the information “will be key to protecting the nation's critical electric infrastructure.” (EEI, No. 9, pp.12-13).

DOE clarifies and amends proposed § 1004.13(e)(1)(vii) to state that a conference call will be scheduled within five days of when the CEII submitter is notified of the request, and the submitter will receive a copy of the request before the conference call is convened.

The Department agrees with EEI's recommendation that close coordination between all relevant Federal agencies is critical to ensuring protection of the nation's critical electric infrastructure. Therefore, the Department has amended § 1004.13(e)(4) to specifically include DHS and the Nuclear Regulatory Commission.

The language from § 1004.13(f)(6)(ii) of the proposed rule (renumbered as § 1004.13(g)(7)(ii)) is moved to new § 1004.13(f) and a reference is made to new § 1004.13(f) in the renumbered § 1004.13(g)(7)(ii). This only moves to a new subsection the content of FPA section 215A(d)(1)(B), stating that all information designated CEII is exempt from disclosure under the FOIA exemption codified at 5 U.S.C. 552(b)(3) and other laws requiring the disclosure of certain information or records, whether at the Federal, State, political subdivision, or tribal level of government.

EEI noted that the proposed regulations do not contain a paragraph (g) and the Department should review and edit the number of all paragraphs and references as appropriate before finalizing the rule. (EEI, No. 9, p. 18).

DOE appreciates EEI raising the clerical error. The Department has added paragraph (f) to fix the clerical error and codify the requirements of FPA section 215A(d)(1)(B) in this new section.

Proposed § 1004.13(g) sets forth the procedures the Department would follow to designate CEII. The subsection covers requesting designation for information submitted to or generated by DOE, how DOE would treat submitted information and apply FERC's CEII designation criteria, how DOE would treat information once it has decided whether to designate the information as CEII, and how DOE would protect designated CEII. In particular, proposed § 1004.13(g)(3)(ii) stated that “[i]nformation for which CEII treatment is requested will be maintained by the CEII Coordinator or Coordinator's designee in DOE's files as non-public unless and until DOE completes its determination that the information is not entitled to CEII treatment.” To ensure that submitters of CEII are kept informed of the decision to be made, the Department has added the requirement to § 1004.13(g)(6)(i) that the designation decision be communicated “promptly.”

CEA shared its concern about the consequences of a submitter's inability to produce a public version of a document containing CEII. To alleviate that concern, CEA asked the Department to “clarify accommodations or outcomes if a submitter is unable to produce a public version of CEII.” (CEA, No. 12, p. 4).

In response to CEA's comment, the Department clarifies that if a submitter cannot produce a public version of a document with CEII, then the Department will provide a public version in response to a valid FOIA request with the CEII or other FOIA-exempt material redacted. The Department prefers, however, that a submitter provide public and non-public versions of documents containing CEII. Before the FAST Act amendments to the FPA, filers at FERC would routinely submit two versions of documents in this way. DOE encourages, but does not require, the same approach. The Department also suggests that CEII material be consolidated, to the extent possible, within a document rather than scattered throughout a document.

The comments of the American Public Power Association (APPA), the Large Public Power Council (LPPC), and the (National Rural Electric Cooperative Association (NRECA) (collectively, Joint Trade Associations) recommend that “the Department specify . . . that material maintained `in DOE's files as non-public' during the pendency of a request for CEII designation will be treated and handled in all respects as if it were CEII, as appears to be the Department's intent. [I]n particular, that treatment of electronic information as non-public will include `stor[age] in a secure electronic environment' with appropriate labeling, as the NOPR proposes for CEII.” (Joint Trade Associations, No. 15, pp. 9-10).

DOE believes that such a clarification is not necessary. The proposed regulation already states that “[w]hen a requester seeks information for which CEII status has been requested but not designated . . . DOE will render a decision on designation before responding to the requester or releasing such information. Subsequently, the release of information will be treated in accordance with the procedures established for CEII-designated material, or the return of information not designated as CEII.” Therefore, it is sufficiently clear that the Department will treat non-designated, CEII-marked information as if it were already designated CEII, until a designation has been conferred on the information. However, to prevent confusion, the Department amends § 1004.13(g)(7)(iii) to state that “secure place” refers to locked room or file cabinet.

EEI recommends that that the Department address how to mark information that cannot be physically labeled such as machine-to-machine information that may be shared with the Department because several DOE Power Marketing Administrations regularly receive machine-to-machine, electronic information from electric companies. (EEI, No. 9, p. 10).

In response to EEI's recommendation, DOE amends § 1004.13(g)(7) to require the marking of electronic information with the words “CEII-CRITICAL ELECTRIC INFRASTRUCTURE INFORMATION—DO NOT RELEASE” in the electronic file name or transmitted under a Non-Disclosure Agreement (NDA) or other agreements or arrangements, such as those identified in § 1004.13(j)(3), to an electronic system where such information is stored in a secure electronic environment that identifies the stored information as CEII. The Department agrees that the PMAs receive a significant amount of CEII, including real-time, streaming information. The Department understands that it may not be practical or possible to physically mark each electronic file or each bit of real-time, streaming data submitted to the PMAs. The Department will consider the information marked as long as it is shared with the PMAs under appropriate protections, transmitted through secure protocols, and stored in secure electronic environments that identify information as CEII. For instance, an entity sharing real-time operating information under the North American Electric Reliability Corporation's Operating Reliability Data Confidential Agreement with PMAs does not need to mark the data, provided that the entity supplying the data communicates to the PMAs that such real-time data is being provided under the agreement and the entity providing the data requests CEII designation. The PMAs will store such data in secure electronic environments identifying information as CEII. The Department notes that the DOE CEII Coordinator or Coordinator's designee still needs to review and evaluate such information and make a CEII determination. The marking of information as CEII does not guarantee that such information will be designated as CEII.

EEI encourages the Department to clarify the marking requirements for submitting pre-designated and machine-to-machine information as CEII. In particular, EEI supports the pre-designation of information “about [Defense Critical Electric Infrastructure (DCEI)] on incidents and emergencies reported through the Department's Form OE-417, and Federal spectrum information managed by the National Telecommunications and Information Administration (“NTIA”) . . . however, it is unclear whether the proposed procedures require submitters of this pre-designated information to follow the submission process outlined in § 1004.13(f)(1)(i) through (iv).” (EEI, No. 9, p. 9).

The Joint Trade Associations urge DOE to “pre-designate” all information as CEII for which a CEII designation is requested. (Joint Trade Associations, No. 15, p. 6). Joint Trade Associations argues that “Defense Critical Infrastructure Information, Form OE-417 submissions, and Federal spectrum information is likely to reflect CEII, and it is appropriate to immediately extend a blanket of protection over these submissions.” Id. This approach would not preclude the case where “individualized designation determination would still be made on all information for which CEII treatment is requested, which would protect against over-designation of material that does not qualify as CEII.” Id. at 8. Further, the Joint Trade Associations argue “if the Department does not adopt pre-designation for all materials . . . DOE should specify that a public power utility that receives a state public records request for information that has been submitted to DOE with request for CEII designation will have the opportunity to consult with the DOE CEII Coordinator and receive an expedited determination as to whether the submitted information is CEII under DOE's regulations.” Id. at 11.

EarthJustice et al. also raised concerns with the Department's suggested blanket CEII designation of information related to DCEI. The comment doubted that all information related to DCEI would meet the CEII criteria. See id. The comment characterized the automatic DCEI designation as a “sweeping restriction on public access to information that would not lead to disclosure of CEII,” in violation of the FAST Act, “and the Department's failure to provide reasonable justification for this element of the proposal also violates the [Administrative Procedure Act].” Id. at 9.

S&P Global Market Intelligence and E&E News oppose what they describe as the Department's intent to automatically designate the content of submitted Form OE-417 (or successor), including Schedule 2 (the narrative description), as CEII. (S&P Global Market Intelligence, No. 6, p. 1; E&E News, No. 8, at p.1). S&P Global Market Intelligence raised the following three points opposing the Department's proposal. First, the Department did not explain why it must distinguish between OE-417 Schedule 1 (information that is “not confidential”) and Schedule 2 (information that “DOE proposes `will be protected' upon CEII designation request”). (S&P Global Market Intelligence, No. 6, p. 1). Second, an automatic exemption would be at odds with FERC's requirement of adequate justification for a CEII designation. Finally, the Department in 2014 proposed to revoke public access to Form OE-417 Schedule 2 under the Confidential Information Protection and Statistical Efficiency Act of 2002, but never did, based on feedback. Id. at 2.

E&E News also opposed the Department's proposal. First, automatically exempting any portion of the Form OE-417 from applicable FOIA laws without proper justification would be in conflict with FERC, which requires adequate justification. (E&E News, No. 8, at p.1). Second, E&E News argues that “[i]n years of processing OE-417 information and releasing accompanying data, in whole or in part, under FOIA, DOE has not demonstrated that the public release of properly-redacted Schedule 1 or 2 information ever threatened to impair the security of critical infrastructure . . . Section 2 is where the clarifying details are often provided in the form, without which the public could get a distorted picture of the exact scope of the concern, issue or threat.” Id. at 2. Finally, E&E News argues that in 2014 DOE proposed to revoke public access to Schedule 2 under the Confidential Information Protection and Statistical Efficiency Act of 2002. But based on feedback received, DOE did not proceed with the proposal. Id.

Electric Reliability Council of Texas, Inc. (ERCOT) pointed out that the language in the proposed rule is in conflict with respect to schedule 2 of Form OE-417. In § 1004.13(g)(3) “DOE intends to `automatically' classify information submitted on schedule 2 of Form OE-417 as CEII upon submission of a request for CEII treatment of that information . . . However, the proposed definition of CEII [in § 1004.13(c)(3)] indicates that information submitted on Form OE-417 will be confidential only if it meets the definition of CEII.” (ERCOT, No. 14, p. 2). ERCOT recommends “DOE revise the rule to treat all information submitted on schedule 2 of Form OE-417 as CEII without requiring a further showing of CEII status or even requiring a request for CEII treatment. Otherwise, ERCOT would suggest that the DOE remove the mention of OE-417 from the definition of CEII to avoid confusion.” Id. at 2-3.

In response to the comments above, the Department clarifies that the intent of the Department is not to designate categories of information as CEII through this rulemaking. The Department will therefore remove all references to “pre-designation” in the Final Rule. All information submitted will be reviewed and evaluated and then, if appropriate, designated as CEII by the CEII Coordinator or his/her designee. The Department will modify the definition of CEII to remove the categories Defense Critical Electric Infrastructure; information on electric incidents and emergencies reported to DOE through the Electric Emergency Incident and Disturbance Report (Form OE-417); and/or Federal spectrum information managed by the National Telecommunications and Information Administration (NTIA). DOE notes that whether the information meets one or more of these categories will still be considered in the Department's determination of whether information is CEII. DOE will also render a decision as to whether information is CEII before sharing the information with other Federal or non-federal entities or releasing that information in response to a FOIA request. As a result, there is no practical change in the protection of information for which a CEII designation is requested between the NOPR and this final rule. The Department intends that this practice will facilitate the energy sector's sharing of CEII with DOE and, in requesting information to support its policy initiatives and priorities, it may request CEII-designated information. If information requested by the Department is determined to meet the CEII designation criteria, the Department will designate such information as CEII upon receipt by the Department.

EarthJustice et al. commented on the Department's “pre-designation” of material as CEII, as well as its “interim” treatment of CEII. The comment stated that the proposed rule would allow such information “to be withheld indefinitely without opportunity for judicial review.” (EarthJustice et al., No. 3, p. 3). Further, the comment stressed that the Department “fails to explain its need to provide indefinite, interim treatment of information as CEII based solely on the assertion of the information provider.” Id. at 10.

As discussed above, the Department will not be pre-designating categories of information as CEII through this rulemaking, and CEII designation will hinge on a rigorous review and application of the criteria defining such information. Notwithstanding that approach, information submitted with a CEII designation request will not be shared with the public except in response to a valid FOIA request, and only then if the information is determined not to be CEII, not to fall under any other FOIA exemption, and applicable administrative and judicial remedies have been exhausted pursuant to paragraph 1004.13(i) of the regulations. To clarify, if the information is sought via FOIA, the Department will review and consider whether the information is eligible for official CEII designation. In any event, a submitter will still need to follow all of the submission process outlined in § 1004.13(g)(1)(i) through (iv), and the information will not be designated as CEII until the CEII Coordinator or his/her designee makes a determination.

EarthJustice et al., discussing a related concern, cautioned that pre-designation and interim treatment would hamstring judicial review of CEII determinations. The comments stressed that the amendments to the FPA demonstrate “clear legislative intent to afford protections against arbitrary CEII designations and ensure public access where appropriate.” Id. at 4. More specifically, EarthJustice et al. were concerned that “[b]ecause neither pre-designation nor interim CEII status appears to trigger an opportunity for a person to request reconsideration of that treatment, which would be a prerequisite to judicial review, DOE's proposed rules effectively and inappropriately nullify this section of law.” Id.

As discussed above, DOE will not be pre-designating categories of information as CEII in this rulemaking. If a FOIA request is received for material claimed to be CEII but not yet designated as such, the request will result in a decision by DOE whether the information is CEII. If the submitter pursues DOE's decision through the reconsideration stage described at § 1004.13(i), that decision would then be subject to judicial review.

Finally, EarthJustice et al. pointed out that the Department's promise to return or destroy material not designated CEII would violate the Federal Records Act. Specifically, they said that “[t]he proposal suggests that records could be requested under FOIA, triggering a determination that a CEII designation is unwarranted, and then the records could be returned or destroyed prior to the resolution of the FOIA request[, which] would be patently unlawful.” (EarthJustice et al., No. 3, p. 6). The comment warned that information “could be labeled CEII, however unjustifiably, for the purpose of ensuring that such information is returned or destroyed when a CEII designation is denied, regardless of the information's content or how the Department utilized it.” Id. at 8.

The Department agrees that destruction of submitted material examined for CEII designation may be contrary to the Federal Records Act. The Department therefore revises § 1004.13(g)(6)(iii) to emphasize that it will in all instances comply with the Federal Records Act.

Section 1004.13(h) outlines procedures governing the duration of CEII designation, to include re-applications for CEII designation, expiration of designation, removal of designation, and treatment and return of information no longer designated as CEII.

EEI, joined by Southern California Edison (SoCal Edison), expressed concern that the proposed rule would not ease the regulatory burden on submitters of information claimed as CEII. Their comments warned, for instance, that “[d]uplicative tracking [of CEII expiration dates] could quickly become onerous and overwhelming for submitters who may also have to track information they have shared with other Federal entities.” (EEI, No. 9, pp. 15-16). They suggested “that the Department notify the CEII submitter and automatically initiate the re-designation process before the CEII designation period expires.” Id. at 16. They also recommended a “default action” of returning or destroying non-CEII and “allowing at least ten days for submitters to comment in writing prior to the removal of CEII designations.” Id.

The Joint Trade Associations described similar concerns. Specifically, their comments expressed unease “that the need for CEII submitters to track designation durations and dates of expiration for potentially numerous CEII submissions over multiple years could be a record-keeping challenge and a potential trap for the unwary that could put CEII designations at risk of inadvertent expiration.” (Joint Trade Associations, No. 15, pp. 11-12). They recommended “revis[ing] the proposed regulations to specify that, like FERC, DOE will continue to treat CEII as non-public even after a designation has lapsed due to the passage of time,” and that “submitters of CEII for which a designation has lapsed would receive notice of any requests for such information (by either a Federal or non-federal entity) and an opportunity to assert that DOE should re-designate the information as CEII.” Id. at 12.

The Department agrees with the comments that the Department could automatically initiate the re-designation process before the CEII designation period expires. Therefore, the Department clarifies there are two methods for initiation of the re-designation process. The Department may automatically initiate the re-designation process or the CEII submitter may request re-designation. Thus, the Department revises § 1004.13(h)(1) to add a subparagraph (iii) to make clear that the Department can also automatically initiate the re-designation process at any time during the duration of the designation.

Furthermore, the Department clarifies that information whose CEII designation has lapsed will not be immediately disclosed to the public. The information would only be disclosed following a review and determination as to whether CEII or other FOIA exemptions are applicable. Should the Department receive a FOIA request for the information, and determine that the information would be responsive to the FOIA request, the submitter or the Department will have an opportunity to contend that the information should be re-designated CEII prior to release. Regardless of the Department's re-designation decision, the aggrieved party could seek reconsideration, after which judicial review would be available if desired.

Finally, the Department cannot return or destroy non-CEII in violation of the Federal Records Act or other applicable laws. The Department therefore declines to institute the default action as the commenters recommended. Instead, the Department will return or destroy non-CEII consistent with applicable law and will make that evaluation on a case-by-case basis.

Proposed § 1004.13(i) describes how a submitter may request reconsideration of a decision not to designate CEII, not to release CEII in response to a request for release, or not to maintain an existing CEII designation, and discusses eligibility for judicial review. The subsection also notes that, with several exceptions, a reconsideration request triggers a stay of the underlying decision. The Department would like to clarify that all submitters of information proposed for CEII designation may request reconsideration of a DOE decision not to designate that information as CEII. A request for reconsideration can be made through a secure electronic submission or by mail according to the instructions at 10 CFR 205.12. The Department therefore revises § 1004.13(i) to allow for secure electronic submission or by mail according to the instructions at 10 CFR 205.12.

EarthJustice et al. stated that the Department does not provide due process to challengers of its decisions. The comment accuses the Department's proposed rule of being “little more than an attempt to hide the Department's decision-making process from public scrutiny and obfuscate judicial challenges to the Department's authority.” (EarthJustice et al., No. 3, p. 14). Further, the comment points out that, in contrast to FERC, “[t]he proposed rules notably do not provide any means for parties to Department proceedings to obtain timely access to information that is designated as CEII or preliminarily treated as CEII, and which therefore cannot be accessed by the public.” Id. at 13. The comment stresses that “[d]enying access to information that forms the basis of Department decision-making to parties affected by those decisions is inconsistent with due process.” Id.

In response, the Department emphasizes that the CEII designation procedure is an exercise in balancing a requester's need for information against the Nation's interest in national security. When information does not meet the CEII standard, the Department may disclose it if the Department receives a request under FOIA and the information is not otherwise protected from disclosure. When the Department finds that information qualifies as CEII, the Department will withhold it if the Department receives a FOIA request. Those aggrieved by such decisions have a number of avenues to seek relief, as specified in the rule and in DOE's FOIA regulations.

As indicated in proposed § 1004.13(j), DOE may share CEII as necessary to carry out its specific jurisdictional duties pursuant to section 215A of the FPA and as the lead Sector-Specific Agency for cybersecurity for the energy sector under section 61003(c)(2)(A) of the FAST Act, and the Sector-Specific Agency for Energy (Critical Infrastructure) under Presidential Policy Directive 21, “Critical Infrastructure Security and Resilience” (Feb. 12, 2013). Those submitting CEII would have DOE's assurance that the information will be protected from unauthorized disclosure. The Department would follow standardized procedures when sharing CEII with Federal and non-federal entities to ensure the protection of CEII. Non-federal entities would be required to enter into a NDA with the Department, meeting the standards outlined in the proposed rule, prior to receiving CEII from DOE. When a non-federal entity requests such information, the DOE CEII coordinator would notify the submitter of the CEII and the appropriate DOE Office(s), to facilitate coordination and allow the submitter to raise concerns related to a requesting entity. The DOE CEII coordinator would, in consultation with the appropriate DOE Office(s), make a final determination on whether to release any CEII-designated material in response to such a request.

As mentioned above, DOE recognizes the importance of coordination among Federal entities with similar programs, therefore DOE revises § 1004.13(j)(1) to allow for CEII to be shared with other Federal entities without such entities being subject to the procedures set forth in § 1004.13(k). Instead, DOE will evaluate requests by Federal entities for CEII on a case-by-case, fact-specific basis, and may request information from the Federal entity explaining the specific jurisdictional responsibility, and the entity program charged with implementing that responsibility, to be fulfilled by obtaining the CEII. This approach allows DOE to continue its goal of appropriate sharing of CEII within the Federal Government. It also ensures that Federal entities will have access to CEII to carry out jurisdictional responsibilities.

ERCOT urges DOE to reconsider its approach to share CEII with non-federal Entities and instead “[f]or CEII that DOE obtains from external sources, those who can demonstrate a legitimate need for that information should be able to obtain the information directly from the source of that CEII . . .” (ERCOT, No. 14, p. 1). PJM Interconnection LLC (PJM) notes that it “has its own procedures under which requestors may submit requests and obtain CEII directly from PJM . . . PJM is concerned that as written, the proposed DOE rule potentially allows for requesters to circumvent the more rigorous CEII processes of the RTOs by simply going directly to the DOE for the requested information.” (PJM, No. 13, p. 5). PJM recommends DOE revise its proposed regulations “to require a requestor to first seek the information from the submitter of the CEII . . . Ultimately, if a requester is denied access to CEII from the submitter of the information, the requester could still seek the CEII from the Department” ( Id. at pp. 5-6). The Joint Trade Associations recommend that “DOE reconsider its proposal to allow sharing of CEII that was not generated by DOE over the objection of the submitting entity in cases where information was voluntarily provided to DOE by the submitter.” (Joint Trade Associations, No. 15, p. 15).

DOE declines to revise its procedures as requested in the comments above. Once the CEII is in the Department's possession, it is the Department's obligation to determine whether to share the information. However, the Department clarifies that it will balance the need for and intended use of the information in the interest of national security against any concerns the CEII submitter has regarding the release of the information. The Department therefore revises § 1004.13(j)(2) to emphasize that a request shall not be entertained unless the requesting non-federal entity can demonstrate that the release of information is in the national security interest. In addition, based on other comments set forth below in Section L, DOE is adopting the criteria set forth in the FERC regulations in § 1004.13(k) for the detailed statement that is required by a requestor of CEII. These criteria provide more specificity with regard to the proposed § 1104.13(k)(2) as to what DOE will expect in the explanation of need provided with a request for CEII.

EEI encourages the Department to clarify and align its procedures for sharing with Federal and non-federal entities. In particular, EEI recommends “that in § 1004.13(j)(1) the Department explicitly require Federal Entities with which the Department shares CEII to protect the CEII from access or disclosure by individuals or organizations that have not been authorized by the Department and limit their use of the CEII.” (EEI, No. 9, p. 19). EEI argues that only requiring minimum protections for CEII shared with non-federal entities creates a disclosure risk for submitters if DOE shares the information with Federal entities. Id. EEI does acknowledge that the Department's procedures allow the Department to impose restrictions on the use and security of the information but without explicitly requiring minimum protections there is a risk that the information could be disclosed inadvertently, knowingly, or willfully to unauthorized individuals or organizations by other Federal entities. Id. EEI encourages the Department to also consider clarifying that the CEII it shares with Federal entities be maintained in accordance with the Department's CEII procedures. Id.

The Department clarifies that a Federal agency in receipt of CEII from the Department must protect that information in the same manner as the Department. That agency will be required to execute an appropriate Agency Acknowledgment and Agreement. The Department has revised § 1004.13(j)(1) to require an authorized agency employee to sign an acknowledgement and agreement that states the agency will protect the CEII in the same manner as the Department and will refer any requests for the information to the Department. Notice of each such request must also be given to the CEII Coordinator, who shall track this information.

PJM points out that “[i]t is unclear from the proposed rule whether the Department intends for the contemplated CEII NDA to apply to each individual request . . . or whether the Department intends for the requester to enter into the CEII NDA once, with such CEII NDA applying to all requests made by the requester for a certain period of time.” (PJM, No. 13, p. 6). PJM recommends “DOE's CEII NDAs to be specific to the requested information, be specific to the named individuals, and subset on their own terms, absent specific requests for renewal after twelve (12) months. Incorporating these parameters into the Department's procedures would avoid the perpetuation of stale NDAs not tied to specific data or signed by individuals no longer employed by the particular entity under which the request was made to the DOE.” Id at 6-7.

The Department revises § 1004.13(j)(2) to clarify that a requester that has entered into a CEII NDA with the Department is not required to file another NDA with subsequent requests during the calendar year because the original NDA must state that the agreement applies to all subsequent releases of CEII during that calendar year. However, the Department does not believe it is necessary to have an NDA be specific to the individual CEII information requested because all CEII will be maintained and protected in the same manner regardless of source or type of information.

The Joint Trade Associations and the Transmission Access Policy Study Group (TAPS) recommend revising the CEII NDA to include specific reference to the public disclosure law exemption. Both parties contend that including the text of the exemption in the NDA would ensure awareness of the limitation among stakeholders. (Joint Trade Associations, No. 15, p. 10; TAPS, No. 7, p. 3). Further, the Joint Trade Associations pointed out that FERC agreed with this recommendation and referenced the provision in section 215A(d)(1) in its CEII NDA. Id.

DOE agrees that the CEII NDA should reference the provision in section 215A(d)(1) that CEII is exempt from disclosure under Federal, State, political subdivision, or tribal law requiring public disclosure. Accordingly § 1004.13(j)(2) has been revised to include this additional requirement.

EEI encourages “the Department to share the minimum-level NDA with stakeholders for notice and comment to enable input from potential submitters and requesters on what can and should be agreed upon in the minimum-level NDAs.” (EEI, No. 9, p. 21). EEI goes on to state that although it does not oppose the development of protocols for sharing CEII with Canadian and Mexican authorities it recommends that the Department allow for notice and comment by stakeholders. Id. at 21-22.

Section 1004.13(j)(2) already includes minimum requirements for an NDA and is not intended to be exhaustive or preclude other requirements. Under certain circumstances, DOE may add additional provisions to the NDA and submitters may request that additional provisions be added to the NDA.

DOE appreciates EEI's concerns about protocols for sharing CEII with Canadian and Mexican authorities. DOE believes stakeholder notice and comment for the development of the protocols is not necessary. DOE clarifies here that a series of bilateral agreements govern and inform its work with Canadian and Mexican Authorities. As the U.S. power grid is integrated with jurisdictions in both Canada and Mexico, DOE fully intends to work closely with Canadian and Mexican authorities. Our three nations have a shared interest in the optimal functionality of our integrated power grid, and DOE will therefore develop sharing protocols that will ensure consistent treatment of information and data.

Section 1004.13(j)(3) was based on section 215A(d)(2)(D) of the FPA. Since the promulgation of § 215A, the Presidential Decision Directive 63, “Critical Infrastructure Protection” (May 22, 1998) referenced in section 215A(d)(2)(D) was superseded by Homeland Security Presidential Directive/HSPD-7, “Critical Infrastructure, Identification, Prioritization, and Protection” (Dec. 17, 2003), which has since been revoked by Presidential Policy Directive 21, “Critical Infrastructure Security and Resilience” (Feb. 12, 2013) (PPD-21). Therefore, DOE includes reference to information sharing and analysis organization (ISAO) defined at 6 U.S.C. 671(5), which defines ISAO as “any formal or informal entity or collaboration created or employed by public or private sector organizations for purposes of gathering and analyzing . . . communicating or disclosing . . . and voluntarily disseminating critical infrastructure information, including cybersecurity risks and incidents.” ISAO includes information sharing and analysis centers. See, e.g., 6 U.S.C. 659(d)(1)(B)(ii).

Proposed § 1004.13(k) delineates procedures for requesting CEII designation and sharing CEII-designated materials. A request must include contact information, an explanation of the need for and intended use of the CEII, and a signed Non-Disclosure Acknowledgment or Agreement, as applicable.

DOE received several comments requesting additional details concerning the criteria and procedures that DOE will apply in responding to requests for release of CEII. For example, EEI recommends that DOE “consider clarifying that it will review the legitimacy of received requests and their associated requestors in making its sharing determination.” (EEI, No. 9, p. 15). MISO stated that “DOE should specify criteria for the review of requestors and requests, and consistently abide by those criteria throughout the DOE Offices when making decisions about sharing CEII.” (MISO, No. 11, p. 4). PJM noted that “the Department should deny a non-federal entity request that merely provides a broad need statement, such as general explanations of the business or profession of the requester or generalized statements that the requester intends to use the CEII in the normal course of the requestor's business or profession.” (PJM, No. 13, p. 3). PJM recommended “the requestor should be required to detail with specificity its need to know the requested information and why a request to DOE for release of CEII is the sole means for it to accomplish the purpose outlined in its request.” Id. at 4. The Joint Trade Associations recommended that “DOE should specify that any entity requesting CEII will be required to make a particularized showing of how its receipt of CEII will accomplish the stated need for the information.” (Joint Trade Associations, No. 15, p. 16). The Sustainable FERC Project and Natural Resources Defense Council recommend that “DOE adopt FERC's language so that there is consistency across agencies.” (The Sustainable FERC Project and Natural Resources Defense Council, No. 10, p. 3).

In response to these comments, DOE is adopting the criteria set forth in the FERC regulations for the detailed statement that is required by a requestor of CEII. In § 1004.13(k), DOE shall consider requests for CEII on a case-by-case basis. In addition, the requestor must provide a detailed statement which includes: (1) The extent to which a particular function is dependent upon access to the information; (2) why the function cannot be achieved or performed without access to the information; (3) an explanation of whether other information is available to the requester that could facilitate the same objective; (4) how long the information will be needed; (5) whether or not the information is needed to participate in a specific proceeding (with that proceeding identified); and (6) an explanation of whether the information is needed expeditiously. As noted in section K, these criteria provide more specificity with regard to the proposed § 1104.13(k)(2) as to what DOE will expect in the explanation of need provided with a request for CEII.

In the NOPR, DOE proposed § 1004.13(l), which sets out penalties and sanctions for unauthorized disclosure of CEII, emphasizing that statutory whistleblower protections still apply.

PJM encourages the Department to consider “specifying disciplinary action for non-Department employees or contractors who knowingly or willfully disclose CEII in an unauthorized manner” such as prohibition of making future requests by the requester.” (PJM, No. 13, p. 7). Additionally, PJM recommended the Department “should consider providing remedies to submitters for incidents of knowing or willful disclosure of CEII in an unauthorized manner.” Id.

The Department notes that the FAST Act does not require the Department to develop sanctions for external recipients of CEII. However, in order to ensure non-federal entities understand the serious nature of a knowing or willful disclosure of CEII, DOE will amend its proposed regulations at § 1004.13(l)(2) to state that any action by a Federal or non-federal Entity who knowingly or willfully falsifies, conceals, or covers up by any trick, scheme, or device a material fact; makes any materially false, fictitious, or fraudulent statement or representation; or makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry to obtain CEII may constitute a violation of other applicable laws and is potentially punishable by fine and imprisonment. DOE will actively pursue all available remedies, including through referrals to appropriate law enforcement entities.

The Department declines to adopt PJM's recommendation that it provide remedies to submitters for incidents of knowing or willful disclosure of CEII in an unauthorized manner. The Department is revising the regulations to specify that knowingly or willfully falsifying information to obtain CEII may constitute a violation of applicable laws and is potentially punishable by fine or imprisonment.

EEI (joined by SoCal Edison) and the Joint Trade Associations expressed concern that inadvertent disclosure of CEII could eliminate that material's status as CEII and lift its FOIA exemption. EEI stated that “it is unclear if an inadvertent disclosure will trigger the Department to remove the CEII designation,” and asked the Department to clarify “the notification procedures for unauthorized CEII disclosures and CEII designation changes.” (EEI, No. 9, p. 13). The Joint Trade Associations asked the Department to “clarify that inadvertent disclosure of CEII by a submitting entity generally would not be a basis for reconsidering/removing a CEII designation.” (Joint Trade Associations, No. 15, p. 4).

The Department clarifies that inadvertent disclosure does not affect the disclosed material's CEII status. Such status is to be determined strictly according to the criteria FERC developed and promulgated in December 2016, as mandated by the FAST Act amendments to the FPA that created the CEII designation authority. Once a CEII designation is applied, the designation continues until it expires or is affirmatively removed.

Nonetheless, it is important to distinguish between inadvertent and deliberate disclosure. As stated in proposed § 1004.13(l)(1), the Department may remove a CEII designation “[i]f the submitter of information [designated CEII] discloses” that information. In response to the comment, the Department revises § 1004.13(l)(1) to emphasize that a CEII designation may be removed following deliberate disclosure, meaning disclosure that is not inadvertent and is sanctioned by the person with ultimate authority to determine whether and how the information is to be shared with the public.

This regulatory action has been determined to be a “significant regulatory action” under Executive Order 12866, “Regulatory Planning and Review.” 58 FR 51735 (Oct. 4, 1993). Accordingly, this action was subject to review under that Executive Order by the Office of Information and Regulatory Affairs of the Office of Management and Budget. DOE has also reviewed this regulation pursuant to Executive Order 13563, issued on January 18, 2011. 76 FR 3281 (Jan. 21, 2011). Executive Order 13563 is supplemental to and explicitly reaffirms the principles, structures, and definitions governing regulatory review established in Executive Order 12866. To the extent permitted by law, agencies are required by Executive Order 13563 to: (1) Propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing that some benefits and costs are difficult to quantify); (2) tailor regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations; (3) select, in choosing among alternative regulatory approaches, those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity); (4) to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public.

On January 30, 2017, the President issued Executive Order 13771, “Reducing Regulation and Controlling Regulatory Costs.” 82 FR 9339 (Feb. 3, 2017). That Order stated the policy of the executive branch is to be prudent and financially responsible in the expenditure of funds, from both public and private sources. The Order stated it is essential to manage the costs associated with the governmental imposition of private expenditures required to comply with Federal regulations.

The development and implementation of the procedures, as laid out in section 215A(d) of the FPA, are designed to protect the security and reliability of the nation's bulk-power system, distribution facilities, and other forms of energy infrastructure. The procedures relate solely to marking information that would facilitate voluntary sharing of CEII among DOE and other appropriate Federal, state, or local entities to address emergencies, accidents, or intentional destructive acts affecting the production, transmission, and delivery of energy resources. There is no new reporting requirement and no new program created as a result of the proposed procedures. This information will be stored on currently existing DOE systems.

This final rule is not subject to the requirements of E.O. 13771 (82 FR 9339, February 3, 2017) because this final rule is related to agency organization, management or personnel. Specifically, the rule provides for marking of information submitted to DOE as CEII so that DOE can protect CEII as necessary and appropriate.

DOE has concluded that promulgation of this rule is covered under the Categorical Exclusion found in DOE's National Environmental Policy Act regulations at paragraph A6 of appendix A to subpart D, 10 CFR part 1021, which applies to rulemakings that are strictly procedural, such as rulemaking (under 48 CFR part 9) establishing procedures for technical and pricing proposals and establishing contract clauses and contracting practices for the purchase of goods and services, and rulemaking (under 10 CFR part 600) establishing application and review procedures for, and administration, audit, and closeout of, grants and cooperative agreements. Accordingly, neither an environmental assessment nor an environmental impact statement is required.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) requires preparation of an initial regulatory flexibility analysis for any rule that by law must be proposed for public comment, unless the agency certifies that the rule, if promulgated, will not have a significant economic impact on a substantial number of small entities. As required by Executive Order 13272, “Proper Consideration of Small Entities in Agency Rulemaking,” 67 FR 53461 (Aug. 16, 2002), DOE published procedures and policies on February 19, 2003, to ensure that the potential impacts of its rules on small entities are properly considered during the rulemaking process. 68 FR 7990 (Feb. 19, 2003). DOE's procedures and policies are available on the Office of General Counsel's website: https://energy.gov/gc/office-general-counsel.

DOE has reviewed this final rule under the provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. This final rule sets forth agency procedures for the designation, sharing, and protection of CEII, and applies to DOE employees, DOE contractors, agents of DOE, and individuals or organizations submitting a request for CEII designation or who have requested or been permitted access to CEII. The proposed procedures for marking incoming requests and/or submissions, which are expected to facilitate voluntary sharing of CEII among DOE and other appropriate Federal, state, or local entities to address emergencies, accidents, or intentional destructive acts to the production, transmission, and delivery of energy resources, are not expected to result in a significant impact to stakeholders. FERC's regulations already require entities requesting CEII designation to mark the subject information. DOE's procedures would provide consistency and would also help avoid unauthorized disclosure or release. DOE therefore expects that these procedures would not affect DOE's decision to designate submitted information as CEII, nor any decision to withhold or release information to requesters of energy infrastructure information under FOIA. On the basis of the foregoing, DOE certifies that this regulation will not have a significant economic impact on a substantial number of small entities. Accordingly, DOE has not prepared a regulatory flexibility analysis for this rulemaking. DOE's certification and supporting statement of factual basis was provided to the Chief Counsel for Advocacy of the Small Business Administration pursuant to 5 U.S.C. 605(b) and the Department did not receive any comments on the certification or the economic impacts of the rule.

Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ) (PRA) and the procedures implementing that Act at 5 CFR part 1320 require the Office of Management and Budget to review and approve certain information collection requirements imposed by agency rule. This Final Rule does not impose any additional information collection requirements. Therefore, the information collection regulations do not apply to this Final Rule.

The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) generally requires Federal agencies to examine closely the impacts of regulatory actions on State, local, and tribal governments. Section 101(5) of title I of that law defines a Federal intergovernmental mandate to include any regulation that would impose upon State, local, or tribal governments an enforceable duty, except a condition of Federal assistance or a duty arising from participating in a voluntary Federal program. Title II of that law requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and tribal governments, in the aggregate, or to the private sector, other than to the extent such actions merely incorporate requirements specifically set forth in a statute. Section 202 of that title requires a Federal agency to perform a detailed assessment of the anticipated costs and benefits of any rule that includes a Federal mandate that may result in costs to State, local, or tribal governments, or to the private sector, of $100 million or more in any one year (adjusted annually for inflation). 2 U.S.C. 1532(a) and (b). Section 204 of that title requires each agency that proposes a rule containing a significant Federal intergovernmental mandate to develop an effective process for obtaining meaningful and timely input from elected officers of State, local, and tribal governments. 2 U.S.C. 1534.

This rule will not result in the expenditure by State, local, and tribal governments in the aggregate, or by the private sector, of $100 million or more in any one year. Accordingly, no assessment or analysis is required under the Unfunded Mandates Reform Act of 1995.

Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-being. This rule will not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.

Executive Order 13132, “Federalism,” 64 FR 43255 (Aug. 4, 1999), imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have Federalism implications. Agencies are required to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and carefully assess the necessity for such actions. DOE has examined the rule and has determined that it will not preempt State law and will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. No further action is required by Executive Order 13132.

With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (Feb. 7, 1996), imposes on Executive agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; and (3) provide a clear legal standard for affected conduct rather than a general standard and promote simplification and burden reduction. Section 3(b)(2) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) Clearly specifies the preemptive effect, if any, to be given to the regulation; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction; (4) specifies the retroactive effect, if any, to be given to the regulation; (5) defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether they are met or it is unreasonable to meet one or more of the standards. DOE has completed the required review and determined that, to the extent permitted by law, the rule meets the relevant standards of Executive Order 12988.

The Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB.

OMB's guidelines were published at 67 FR 8452 (Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446 (Oct. 7, 2002). DOE has reviewed this rule under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines.

Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to the OMB a Statement of Energy Effects for any proposed significant energy action. A “significant energy action” is defined as any action by an agency that promulgated or is expected to lead to promulgation of a final rule, and that (1) is a significant regulatory action under Executive Order 12866, or any successor order and is likely to have a significant adverse effect on the supply, distribution, or use of energy; or (2) is designated by the Administrator of the OIRA as a significant energy action. For any proposed significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use. This regulatory action will not have a significant adverse effect on the supply, distribution, or use of energy because it is concerned primarily with the procedures for designating, protecting, and sharing information. As the FAST Act highlighted, protection of CEII will have a positive effect on the energy supply, and is therefore not a significant energy action. Accordingly, DOE has not prepared a Statement of Energy Effects.

As required by 5 U.S.C. 801, DOE will submit to Congress a report regarding the issuance of this final rule prior to the effective date set forth at the outset of this rulemaking. The report will state that it has been determined that the rule is not a “major rule” as defined by 5 U.S.C. 801(2).

The Secretary of Energy has approved publication of this final rulemaking.

For the reasons set out in the preamble, the DOE amends part 1004 of title 10, Code of Federal Regulations as set forth below:

I. Background

SBA is authorized under sections 7(a) and 7(m) of the Small Business Act and title V of the Small Business Investment Act of 1958 (the “SBI Act”) to conduct small business loan programs. 15 U.S.C. 636(a) and (m) and 695 et seq. For purposes of this rule, SBA's business loan programs consist of the 7(a) Loan Program, the Microloan Program, and the Development Company Loan Program (“504 Loan Program”). These programs provide critical access to credit for America's small businesses, bridging the lending gap that exists in the market for our nation's smallest companies. Along with the authority to offer government guarantees, Congress provided SBA the authority to supervise lenders participating in these programs. 15 U.S.C. 634, 636, 650, and 697.

Growth in lending in the 7(a) Loan Program prompted Congress to undertake a thorough examination of the tools available at SBA to ensure that comprehensive oversight is accomplished. Following that review, Congress enacted the Small Business 7(a) Lending Oversight Reform Act of 2018, Public Law 115-189 (June 21, 2018) (the “Act”). The Act strengthened SBA's 7(a) Lender, Certified Development Company (“CDC”), and Microloan Intermediary (“Intermediary”) supervision authorities and the office charged with that responsibility, SBA's Office of Credit Risk Management (“OCRM”).

The Act required SBA to promulgate regulations to implement certain of its provisions. Accordingly, on June 21, 2019, SBA published a notice of proposed rulemaking to implement the legislation by proposing updates to its lender oversight and related regulations, as codified in parts 120 and 134 of title 13 of the Code of Federal Regulations (“CFR”). 84 FR 29092. The proposed updates also included technical corrections and clarifications to better inform lenders and to strengthen enforcement. Because some provisions in the legislation covered “any Lending Partner or Intermediary participant . . . in a lending program of . . . [SBA's] Office of Capital Access” and because SBA's 7(a) oversight framework is generally interwoven with that of the 504 Loan Program and the Microloan Program, SBA proposed to extend certain specific updates to CDCs and Intermediaries. The comment period for the proposed rule closed on August 20, 2019.

The Agency received 43 comments. Sixteen comments were submitted by or on behalf of 7(a) Lenders. Twenty-one comments were submitted by or on behalf of CDCs (this group includes 4 CDCs that are also Intermediaries and/or Community Advantage (“CA”) Lenders). In addition, SBA received comments from two trade associations, one law firm, and three anonymous commenters.

Many comments were supportive of the proposed rule and SBA's efforts to preserve the integrity of the business loan programs. These comments also expressed appreciation of the Agency's efforts to improve oversight. The comments included some suggestions for the rule, including amendments to proposed provisions that commenters contended were not or did not appear to be consistent with the language of the statute or its intent. Some commenters, primarily CDCs, generally opposed the rule but made few specific comments or suggestions. SBA appreciates all comments received and has incorporated many of the suggestions into the final rule. The following is a section-by-section analysis  1 of the final rule including section-specific comments received and changes made.

A. Section 120.10—Definitions. SBA proposed to update three definitions in § 120.10. First, SBA proposed to update the definition of “Federal Financial Institution Regulator” by deleting the reference to the Office of Thrift Supervision (“OTS”) as OTS has been abolished and merged into the Office of the Comptroller of the Currency (“OCC”) and other banking agencies. SBA received no comments on this update and is adopting the change to the definition as proposed.

Second, SBA proposed to revise the definition of “Lender Oversight Committee” (“LOC”) to state that LOC membership and duties are derived from the Small Business Act; that the LOC meets quarterly; and that it votes on formal enforcement action recommendations.

Eighteen commenters  2 stated that the proposed definition “provides only an abridgement of the LOC definition as provided in the statute.” The commenters suggested that SBA provide a more complete enumeration of LOC duties in this definitional section of part 120. SBA notes that the LOC's duties can be found in section 48 of the Small Business Act and in SBA's Delegations of Authority 12-G for lender oversight and enforcement activities at 79 FR 56842, 56844 (September 23, 2014), as updated by 83 FR 48681, 48682 (September 26, 2018). Nevertheless, SBA has considered this request and has expanded the final rule definition to specifically include the significant LOC duties as well as a reference to the specific statutory provision enumerating the LOC duties. A complete listing of the LOC's statutory duties and its membership, however, can be found in the Lender Oversight Delegations of Authority as referenced above.

In § 120.10, SBA also proposed to clarify the term “Loan Program Requirements.” Specifically, the proposed rule provided that this term may also be referred to as “SBA Loan Program Requirements” and that it includes Federal Register notices and applicable government-wide regulations. In addition, SBA proposed to make the definition applicable to Intermediaries.

In response to the proposal, eighteen commenters requested that SBA exclude “official SBA notices,” “forms,” and “agreements” from the definition of Loan Program Requirements. Commenters stated it was their understanding that the intent of Congress was to assure that performance requirements being imposed on lenders would be only those imposed by statute or those formally and publicly announced by SBA in regulations, SOPs or Policy Notices. SBA notes that official SBA notices, forms, and agreements have long been a part of SBA's regulatory definition of Loan Program Requirements and are an integral part of SBA supervision. SBA did not propose any changes to that portion of the definition. Official SBA notices ( i.e., SBA Policy, Procedural, and Information Notices) and SBA business loan forms are available to the public on SBA's website. In addition, the Small Business Act, SBI Act, and SBA regulations formally and specifically provide for the use of agreements in SBA's loan programs (see 15 U.S.C. 636, 650(d), and 696 and 13 CFR 120.400, 120.440, 120.434, 120.474, 120.613). Accordingly, SBA is finalizing the definition of “Loan Program Requirements” as proposed.

B. Section 120.101—Credit not Available Elsewhere. One of the primary goals of the Act was to ensure that the “Credit Elsewhere Test” is being applied correctly and consistently by lenders and that it is being appropriately verified by SBA. Proposed § 120.101 codified the new definition for credit elsewhere as contained in the legislation. Under § 120.101 as proposed, credit elsewhere means that credit is unavailable to the small business applicant on reasonable terms and conditions from non-Federal, non-State, and non-local government sources without SBA assistance, taking into consideration the factors associated with conventional lending practices enumerated in the statute.

7(a) Lender commenters generally concurred with proposed § 120.101, with some slight amendments. Specifically, commenters requested that the regulation state that the credit elsewhere requirement is statutorily mandated to make clear that the requirement is imposed by statute. The credit elsewhere requirement is found in 15 U.S.C. 636(a)(1)(A) and 697(b)(2); however, SBA does not believe it is necessary to revise the regulation to include the specific statutory cites.

The proposed rule listed the five statutory factors for determining credit elsewhere. SBA received no comments specific to factors 1-3. The fourth factor provided for consideration of the loan term necessary to reasonably assure repayment from business cash flow. Eighteen commenters requested that the section specifically allow either “actual” or “projected” cashflow of the business, as referenced in the statute. SBA agrees with this comment and is adding the clarifying language to the final regulation.

The fifth factor is a catch-all provision to cover “other factors” relating to a particular credit application. The preamble to the proposed rule provided examples of the “other factors” that SBA Lenders should consider for the credit elsewhere determination. The examples included management experience, leverage ratio, global cashflow, loan size relative to the age of the business, or personal resources of the owners of the business. The preamble stated that the other factors must be specifically explained and documented with relevant supporting documentation in the lender's credit memorandum. 3 Eighteen commenters requested that SBA include the “other factors” identified in the preamble to the proposed rule, as well as other examples, in future versions of SBA's Standard Operating Procedures (“SOPs”) to provide guidance to lenders on the interpretation of the regulatory provision. 4 SBA agrees with this comment. SBA will incorporate a list of “other factors” and other relevant examples for credit elsewhere in the relevant SOPs.

Approximately twenty-four commenters requested that SBA not apply the credit elsewhere provision (or any of the other provisions in the proposed rule) to CDCs. These commenters claimed that “extending provisions of [the Act] to the 504 program [including the credit elsewhere provision] has no basis in law . . . .” SBA does not agree, and believes that there is ample support for applying the credit elsewhere provision to the 504 Loan Program. The § 120.101 credit elsewhere provision has been a longstanding feature of the 504 Loan Program in SBA regulations for many years and dates back to at least 1986. See 13 CFR 108.8(a) “Borrower Requirements and Prohibitions” (1987). There is also statutory support for applying this provision to the 504 Loan Program. Section 503(b)(2) of the SBI Act provides that “[n]o guaranty may be made with respect to any debenture under subsection (a) unless . . . . Necessary funds for making such loans are not available to such company from private sources on reasonable terms.” In addition, section 503(a) of the SBI Act authorizes SBA to guarantee 504 program debentures “on such terms and conditions as the Administration may by regulation determine to be appropriate.” Further, section 308(f) of the SBI Act states that “[i]n the performance of, and with respect to the functions, powers, and duties vested by this Act, 5 the Administrator and the Administration shall (in addition to any authority otherwise vested by this Act) have the functions, powers, and duties set forth in the Small Business Act . . . .” Finally, SBA's Congressional oversight committee is well aware of and has acknowledged the credit elsewhere requirement as an eligibility standard for small businesses in the 504 Loan Program. For example, in her hearing memo, dated December 10, 2019, to Members of the House Small Business Committee Subcommittee on Investigations, Oversight, and Regulations, Chairwoman Judy Chu stated that, “In order to qualify for a 504 loan, a business must: . . . demonstrate the need for the desired credit and that the funds are not available from alternative sources, including personal resources of the principals; and be certified by a lender that the desired credit is unavailable to the applicant on reasonable terms and conditions from nonfederal sources without SBA assistance.”  6 Consequently, it is well-established that the credit elsewhere requirement applies to the 504 Loan Program.

In addition, the commenters argued that economic development and job requirements, not credit elsewhere, properly govern when a business or project is eligible for the 504 Loan Program. SBA agrees that the program has important economic development and job creation objectives; however, it is also important that SBA not use taxpayer dollars to finance those loans that can be financed by the private sector on reasonable terms and conditions.

These commenters also opposed the application of other provisions of the Act to CDCs, arguing that the process, title, and content of the Act make it clear that the statute is for the 7(a) program only. 7 Contrary to that statement, SBA notes that the opening provision of the legislation, which statutorily established the Office of Credit Risk Management, granted the office the authority to supervise “any Lending Partner or Intermediary participant . . . in a lending program of the Office of Capital Access . . . .” As CDCs are a Lending Partner in a lending program of the Office of Capital Access, SBA is not persuaded by this argument.

Two 7(a) Lenders commented that the credit elsewhere requirement will be difficult to comply with because lenders cannot know what terms and conditions competitors offer. As stated above, credit elsewhere is a statutory requirement that requires the consideration of several factors. Based on these factors, an institution can make a reasonable determination as to whether an Applicant has credit available without a government guaranty. The key here, for purposes of compliance, is that each lender documents in its credit memorandum its reasonable consideration of the factors relevant to the particular application and that the lender makes that documentation available for SBA review.

In light of the statutory and regulatory authorities cited above and the well-established history of the credit elsewhere regulation as applicable to both programs, SBA believes it is reasonable to apply the amendments to the credit elsewhere regulations, and certain other sections as noted within the final rule, to the 504 Loan Program. Accordingly, SBA is finalizing the section as proposed with the change to the fourth factor discussed above.

C. Section 120.180—Compliance with Loan Program Requirements. Sections 3 and 4 of the Act provide that SBA is to oversee lender compliance with SBA Loan Program Requirements, including credit elsewhere. SBA proposed changes to § 120.180 to facilitate that oversight. The rule proposed to codify SBA's current requirement that SBA Lenders maintain documentation to support that Loan Program Requirements, including those regarding credit elsewhere, have been met. SBA examines these documents during reviews and exams. This documentation facilitates prudent lending, and maintaining records is a practice that all prudent lenders already undertake. The proposed amendments to § 120.180 also clarified that Intermediaries, in addition to 7(a) Lenders and CDCs, are expected to comply with Loan Program Requirements.

SBA received no comments on proposed § 120.180 and is adopting the section as proposed.

D. Section 120.1000—Risk-Based Lender Oversight; § 120.1010—SBA Access to SBA Lender and Intermediary Files; § 120.1015—Risk Rating System; § 120.1025—Monitoring; § 120.1050—Reviews and Examinations; and § 120.1051—Frequency of Reviews and Examinations. SBA proposed updating these sections to remove references to Non-lending Technical Assistance Providers (“NTAPs”), as SBA has not issued technical assistance grants to NTAPs in many years. Technical assistance in the Microloan Program is being administered directly by Intermediaries. SBA received no comments on the proposed changes to these sections. SBA is, therefore, adopting the changes to these sections as proposed.

E. Section 120.1055—Review and Examination Results. Section 120.1055 covers SBA review and examination reports, corrective actions and plans, lender required responses, and lender implementation of corrective actions. SBA proposed to extend the timeframe for a lender or Intermediary to respond to a review/examination report from 30 to 45 calendar days. Eighteen commenters requested that SBA modify the general timeframe for a lender or Intermediary to respond from 45 calendar days to 45 business days. Commenters stated that “business” days was more in-line with the statute and requested that the additional time be provided to better enable lenders to respond to reports. SBA agrees with the requested modification of the general timeframe and is revising the section accordingly.

The commenters also noted that though the proposed rule allows SBA to establish a different time period for a lender to respond, the rule did not specify whether the time period could be shorter or longer. This is true. SBA did not so specify because the statute gives SBA needed flexibility to either extend or shorten the response timeframe on a case-by-case basis. 8 SBA has decided to retain this flexibility but is clarifying in the final rule that SBA may extend or shorten the timeframe.

For example, SBA may extend the timeframe when a lender's management is in transition or until after a lender attends a required Headquarters meeting on its significant findings and corrective actions. Alternatively, SBA may shorten the timeframe if, for example, the deficiencies are few in number but so significant that delay could cause losses to SBA or the lender. This might occur if a lender, using delegated authority, is making ineligible loans.

In § 120.1055 SBA also proposed to clarify when a lender is considered to have received a report for purposes of the regulation ( i.e., the report is considered received on the date it is emailed to the last known email address for the lender or Intermediary, unless the lender or Intermediary can provide compelling evidence that it was received on a different date). Eighteen commenters had no objection to SBA's proposal that lender's date of receipt be the date it was emailed to the last known email address. These commenters, however, recommended that the regulation be amended to also require that reports be sent by mail or other delivery service to the head of the lender institution (or other party deemed appropriate by SBA) at its last known business address. They made this suggestion as they believe that the gravity of the oversight report requires a more formal transmission of the report to the lender. SBA has considered the comment and has determined not to include the commenters' suggested change. While in some cases it may be helpful to also send the report by mail or other delivery service, such duplicative effort may not be justified in all cases. For example, where a review report conveys an assessment of “Acceptable”, it may not be necessary or appropriate to incur additional costs to duplicate delivery by mail. SBA will use judgment and discretion in making the determination on a case-by-case basis.

The eighteen commenters also requested that SBA amend the regulation to include the statutory timeframe for SBA to issue a review/examination report. The statute provides, in general, that SBA will deliver a written review report not later than 60 business days after the date a review is concluded or, if SBA expects to submit the report after the end of the 60-day period, the Agency will notify the 7(a) Lender of the expected date of submission and the reason for the delay. The commenters requested this addition citing a historical lack of timeliness on behalf of the Agency in issuing review reports and because, without timely information regarding perceived violations, lenders questioned whether they would be able to correct their performance and begin to take steps necessary to mitigate potential risk to the Agency. While the commenters stated that OCRM is committed to, and has made good progress in, getting reports out more timely, they believe it is imperative to amend the rule to include this provision. SBA agrees to make this addition and is incorporating the general timeframe into the final regulation.

Finally, SBA proposed to revise § 120.1055 to clarify that a response must address recommendations in addition to findings and corrective actions; to delete reference to NTAPs; and to codify SBA's 90-day timeframe for lenders and Intermediaries to implement corrective actions. The proposed 90-day timeframe included flexibility for a shorter or longer period, as warranted. SBA received no comments specific to these proposed changes. SBA is adopting these amendments to § 120.1055 as proposed.

F. Section 120.1060—Confidentiality of Reports, Risk Ratings and Related Confidential Information. SBA proposed to update § 120.1060 to remove references to NTAPs for the reasons explained in paragraph III.D. above. SBA received no comments on this proposed change. SBA is adopting § 120.1060 as proposed.

G. Section 120.1300—Informal Enforcement Actions. The Act required SBA to codify its informal enforcement actions for 7(a) Lenders into regulations. Accordingly, SBA proposed a new § 120.1300 on informal enforcement actions for 7(a) Lenders. Under the proposed regulation, informal actions would consist of, for example, a commitment letter, mandatory training, and an agreement between SBA and the 7(a) Lender. In addition to listing the types and descriptions of informal enforcement actions, the proposed rule discussed the circumstances that may lead SBA to take such actions ( e.g., when problems are narrow in scope and are correctible, and SBA is confident of the 7(a) Lender's Board and management commitment and ability to correct such problems; where violations are less frequent or less severe but still warrant enforcement; or while SBA more fully assesses risk). The circumstances that SBA proposed are, for the most part, set forth in SBA's current SOPs.

The Act also provided that 7(a) Lenders could appeal informal enforcement actions to Federal district court or to SBA's Office of Hearings and Appeals (“OHA”). Under proposed § 120.1300, a 7(a) Lender would have 20 calendar days to appeal. The proposed rule further provided that an informal enforcement action would remain in effect pending resolution of the appeal, if any, and that SBA would not be precluded from taking other action, including but not limited to, a formal enforcement action under § 120.1500, or as otherwise authorized by law, while the appeal was pending.

Eighteen commenters recommended that § 120.1300 specifically state that the Director of the Office of Credit Risk Management (the “D/OCRM”) (as opposed to “SBA”) takes informal enforcement actions. The commenters requesting this change cited statutory language that authorizes the D/OCRM to take these actions. SBA has considered the request and has adopted it in the final rule. The Act provides that the D/OCRM is authorized to take informal enforcement actions and does not restrict the D/OCRM's authority to delegate this authority. The final regulation, therefore, states that the D/OCRM may undertake informal enforcement actions but does not restrict delegation.

The eighteen commenters also opposed the 20-day appeal time proposed for informal enforcement actions. The commenters requested 45 business days instead, “to allow sufficient time for the lender to assess its situation, hire counsel, and decide on an appropriate strategy.” The commenters also suggested that the SBA's ability to address risks identified during a review would not be adversely impacted by the extended timeframe to request an appeal because the enforcement action would remain in effect pending resolution of the appeal and SBA could pursue formal enforcement action. SBA has considered the request and will retain the 20-day appeal timeframe contained in the proposed rule because these are informal enforcement actions consisting mostly of voluntary agreements and required training designed to bring lenders into compliance and reduce lender and SBA risk of losses. In addition, informal enforcement actions ( e.g., supervisory letters and required training) are generally informative and corrective in nature, non-public, and less likely to impose a significant burden or have a negative effect on a 7(a) Lender. SBA also notes that the 20-day timeframe is the same timeframe that Congress afforded SBA Supervised Lenders for appeals of enforcement actions under section 23(f) of the Small Business Act. Moreover, it provides a longer appeal time than the 14-day appeal timeframe that the banking agencies provide to financial institutions for appeals relating to the immediate issuance of certain final directives and orders under 12 CFR 6.21(a)(2) and 30.5(a)(2) (OCC); 12 CFR 308.201(a)(2) and 308.304(a)(2) (Federal Deposit Insurance Corporation); and 12 CFR 263.202(a)(2) and 263.304(a)(2) (Federal Reserve Board).

SBA received no other comments on proposed § 120.1300. Accordingly, SBA is adopting the section as proposed with the change discussed above.

H. Section 120.1400—Grounds for Enforcement Actions—SBA Lenders. Section 120.1400 sets forth the grounds for SBA's enforcement actions for SBA Lenders. SBA proposed amendments to 13 CFR 120.1400 to implement several provisions of the new legislation and to provide clarifications. First, the rule proposed to amend § 120.1400(b) to explicitly state, and thereby formally recognize, that § 120.1400 grounds extend to both informal and formal enforcement actions. Second, in accordance with the new legislation, the proposed regulation stated that SBA would consider the severity or frequency of a violation in determining the type of enforcement action to take. Third, § 120.1400(c)(6), as proposed, clarified that an action “detrimental to an SBA program” means an action detrimental to “the integrity or reputation of” an SBA program. Fourth, SBA proposed clarifying paragraph (c)(9) to further inform the public that SBA considers an SBA Lender's failure to properly oversee Agent activity to be an example of SBA Lender action/inaction that increases SBA's financial risk. While Agents can be helpful in assisting SBA Lenders in making, servicing, liquidating, and litigating SBA loans, an SBA Lender must exercise due diligence and prudently oversee third-party activity. SBA's policy of holding lenders responsible for third-party activity is neither new to the program nor unusual for regulated lenders. In fact, the Federal Financial Institution Regulators generally expect a financial institution to conduct robust, comprehensive, and appropriately documented due diligence and ongoing risk management of each of the institution's third-party service providers that support critical activities. A financial institution's risk management process may include, for example, assessing the quantity of risk posed to the institution by use of the third-party service provider and the ability of the institution to monitor and control risk; contract structuring and review; ongoing benchmarking of service provider performance; and monitoring the third party's actions on behalf of the bank for compliance with applicable laws and regulations. 9 For purposes of this section, the term “Agent” means all parties included in the definition of “Agent” in 13 CFR part 103 that assist the 7(a) Lender or CDC with making, servicing, liquidating, or litigating their SBA business loans ( e.g., lender service providers, consultants, brokers/referral agents).

SBA also proposed clarifying paragraphs (c)(11) and (12) of this section, which cover grounds for immediate suspension of delegated authority and program authority, respectively. SBA proposed revising these paragraphs to better define the circumstances in which SBA would seek an immediate suspension. The proposed paragraphs stated that SBA may take such immediate action upon a determination that: (i) One of the grounds in paragraph (c) or (f) of that section, as applicable, exists; and (ii) immediate action is needed to protect the interests of the Federal Government (such as where there is risk of immediate harm or loss, a significant program integrity concern, or clear evidence of conduct indicating a lack of business integrity). Situations that may warrant immediate suspension may include, but are not limited to, where there are significant findings relating to the SBA Lender's determination of eligibility ( e.g., credit elsewhere, etc.) or on the credit review, or the underwriting, approval, loan servicing and/or liquidation processes; evidence of fraud; significant concerns as to the SBA Lender's financial condition, capital levels, or solvency; or where an SBA Lender is no longer licensed or lacks staff capable of making, servicing, or liquidating loans, as determined by SBA in its discretion. In addition, SBA proposed revisions to paragraphs (d)(1)(iii) and (d)(3)(i) and (ii) to clarify that an SBA Supervised Lender's violation of “the Small Business Act” or “SBA regulations” is a violation of “Loan Program Requirements”  10 consistent with SBA's use of this term in § 120.1400(c)(2). In conjunction with this conforming change, SBA proposed deleting the word “agreement” from paragraph (d)(1)(iv) as it is redundant with paragraph (d)(1)(iii) as revised.

SBA received no comments on § 120.1400 and is adopting the amendments as proposed.

I. Section 120.1425—Grounds for Formal Enforcement Actions—Intermediaries Participating in the Microloan Program. SBA proposed that § 120.1425 be updated to remove references to NTAPs. SBA also proposed that paragraphs (c)(1) and (c)(2)(vii) on violations of law and Loan Program Requirements be clarified and harmonized with the corresponding provision for SBA Lenders. In addition, the rule proposed to reorder and establish a more logical grouping of the grounds for enforcement. SBA also proposed an additional performance-related ground for enforcement action: A failure to “[m]aintain the financial ability to sustain the Intermediary's operations (including, but not limited to, adequate capital), as determined by SBA.” Consistent with equivalent provisions for SBA Lenders, the proposal added three general grounds to the Microloan Program regulations: (i) Failure to take corrective actions; (ii) engaging in uncooperative or detrimental behavior; and (iii) action or inaction that SBA determines may increase SBA's financial or program risk, as well as a specific ground for immediate suspension of Intermediaries. Finally, SBA proposed a catch-all provision, paragraph (c)(7), for other grounds otherwise authorized by law.

SBA received one comment on § 120.1425. The commenter objected to SBA's proposal to include an Intermediary's failure to maintain the financial ability to sustain its operations ( e.g., maintain adequate capital) as a ground for enforcement action. The commenter contended that the provision can have a broad interpretation. The commenter also stated that Intermediaries operate under vastly different business models than traditional 7(a) Lenders and that most have a business model requiring them to raise 10% to 40% of operational funds on a yearly basis. The commenter requested that SBA recognize these differences in the regulatory language.

SBA recognizes that Intermediaries, as non-profit community lenders, may operate very differently than traditional 7(a) Lenders and that some Intermediaries may plan to raise 10% to 40% of their operational funds yearly. However, all Intermediaries must maintain finances sufficient to sustain operations and repay the SBA Promissory Note(s). SBA must evaluate the financial health of Intermediaries as part of its oversight responsibilities. SBA evaluates whether an Intermediary has sufficient financial strength to sustain its Microloan operations by examining an Intermediary's financial information and related metrics, such as amount of unrestricted net assets and changes in net assets year over year. Through this evaluation, SBA may be able to identify any negative trends early so that it can work with the Intermediary to maintain the ability to successfully operate its Microloan program. This provision is necessary to protect the integrity of the Microloan program. Accordingly, SBA is adopting the regulation in the final rule as proposed.

J. Section 120.1500—Types of Formal Enforcement Actions—SBA Lenders. SBA proposed in § 120.1500 several technical amendments and other changes to implement the Act. Technical changes included the addition of the term “formal” before “enforcement action” to distinguish this section from the proposed new § 120.1300 on informal enforcement actions. Proposed substantive revisions to implement the new legislation within § 120.1500 centered on incorporation of civil monetary penalties (“CMPs”) as a 7(a) Lender enforcement tool. 11 CMPs create a monetary incentive for 7(a) Lenders to comply with SBA Loan Program Requirements. This tool can be particularly effective as a deterrent against financial related non-compliance ( e.g., Lender nonpayment or late payment of amounts it owes to SBA for borrower payments, recoveries received, denials of liability, SBA loan purchase repairs, or fees owed). CMPs may also be warranted in certain critical circumstances ( e.g., where there is a violation of an order, directive, or agreement, or where there is fraud). SBA might also use CMPs where there are reporting failures or delays ( e.g., for failure to timely submit complete purchase packages following SBA Secondary Market purchase). These examples are not all inclusive. The proposed provision included a list of considerations for SBA in determining whether and in what amount to assess a CMP. The considerations are the same as those in 13 CFR 120.465(b) governing CMPs for reporting failures by SBA Supervised Lenders. Specifically, the considerations/factors include, but are not limited to, the following: The gravity ( e.g., severity and frequency) of the violation; history of violations; financial resources and good faith of the 7(a) Lender; and such other matters as justice may require. The list of considerations is also very similar to those in the CMP structures of other Federal agencies ( e.g., the OCC, the Federal Deposit Insurance Corporation, and the Department of Housing and Urban Development's Mortgagee Review Board). SBA assessment of CMPs, as with SBA's other enforcement tools, helps to protect the integrity of the 7(a) Loan Program. In addition to the incorporation of CMPs, proposed § 120.1500 referenced the LOC's role in formal enforcement actions, with its responsibilities set forth in Delegations of Authority and as authorized by the Act.

Eighteen commenters recommended that § 120.1500 state specifically that the D/OCRM (as opposed to “SBA”) takes formal enforcement actions with the approval of the LOC. The commenters requested this change given statutory language that specifically authorizes the D/OCRM to take these actions. SBA has considered the request and agrees to specify that the D/OCRM will take these actions for the same reasons as set forth above in the discussion of § 120.1300. 12 The final regulation, therefore, states that the D/OCRM may undertake formal enforcement action, but does not restrict delegation.

The eighteen commenters also recommended that the section be amended to reference the “$250,000 penalty maximum” provided for by Congress in the new legislation, with the further provision that this maximum may be amended from time to time by notice published in the Federal Register . SBA makes annual adjustments to its civil penalty amounts in accordance with section 701 of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. 13 SBA agrees with this recommendation to state the maximum starting point for the penalty under the statute and is incorporating this change. SBA is finalizing the proposal with the two revisions described above.

K. Section 120.1540—Types of Formal Enforcement Actions—Intermediaries Participating in the Microloan Program. Proposed § 120.1540, like proposed § 120.1500, included a technical amendment to include the term “formal” before “enforcement action” to distinguish the actions under this section from informal enforcement actions for Intermediaries, which are set forth in SOP 50 53, “Lender Supervision and Enforcement.” SBA also proposed to update § 120.1540 to delete references to NTAPs. In addition, SBA proposed revisions to the provision on suspension and pre-revocation sanctions to more closely conform the section to the suspension provision in § 120.1500 for SBA Lenders. Specifically, proposed § 120.1540 provided that suspension may include, but is not limited to, suspension of the authority to make, service, liquidate, and/or litigate SBA microloans. It also provided that it may include a freeze on an Intermediary's Microloan Revolving Fund (“MRF”) and Loan Loss Reserve Fund (“LLRF”) accounts. Finally, proposed § 120.1540 specified that SBA may undertake an “immediate” suspension action ( i.e., a suspension that is effective immediately), and that revocation actions may include a portfolio surrender.

One commenter recommended that § 120.1540 state specifically that the D/OCRM (as opposed to “SBA”) take formal enforcement actions. SBA has considered the request and has adopted it in the final rule (with a clarification that the D/OCRM takes that action with the involvement of the LOC, as appropriate) for the same reasons as set forth above in the discussion of § 120.1300. The final regulation does not restrict delegation. SBA received no other comments on § 120.1540. SBA is adopting the remainder of the regulation as proposed.

L. Section 120.1600—General procedures for formal enforcement actions against SBA Lenders, SBA Supervised Lenders, Other Regulated SBLCs, Management Officials, Other Persons, and Intermediaries. Proposed changes to § 120.1600 included a technical amendment to add the term “formal” before enforcement action in this section. It also included a technical amendment that referenced alternate procedures under law, including but not limited to, those under current § 120.465 governing procedures for assessing CMPs against SBA Supervised Lenders for reporting failures. SBA also proposed to update § 120.1600 to remove NTAPs from the regulation. In addition, the section proposed provisions to implement the new legislation on enforcement action appeals. Specifically, 7(a) Lenders could appeal most formal enforcement actions to OHA or proceed directly to the appropriate Federal district court. (The proposed rule excluded those formal enforcement actions against SBA Supervised Lenders under §§ 120.1500(c) and (d) and 120.465 because the statutory provisions at 15 U.S.C. 650 provide for separate procedures, which are covered in §§ 120.1600(b) or (c) and 120.465.) Finally, SBA proposed that any 7(a) Lender appeal to OHA be submitted within 20 calendar days of the final agency decision. As proposed, the enforcement action would remain in effect pending resolution of any appeal.

Eighteen commenters requested a 45-business day timeframe for appeals. The commenters requested 45 business days “to allow sufficient time for the lender to assess its situation, hire counsel, and decide on an appropriate strategy for its appeal.” SBA proposed a 20-day timeframe because it is the same appeals timeframe that Congress afforded SBA Supervised Lenders under section 23(f) of the Small Business Act. While SBA continues to believe that the 20 calendar days proposed is reasonable, SBA has decided to extend the timeframe to 30 calendar days. Thirty calendar days provide for additional time for a party to appeal than what was proposed, yet appropriately limits risk and allows SBA to carry out its oversight responsibilities in a judicious manner. SBA also believes that 30 days is reasonable, because at the time a 7(a) Lender would be required to file an appeal, the 7(a) Lender would have gone through the process associated with a notice of proposed enforcement action or immediate suspension and should be knowledgeable of the issues and equipped with the information necessary to file an appeal. Accordingly, the final rule provides that 7(a) Lenders have 30 calendar days to appeal to OHA. As indicated above, the final rule also clarifies that it is the final agency decision on a formal enforcement action (as opposed to a notice of proposed enforcement action or immediate suspension  14 ) that is appealable under SBA regulations. SBA received no other comments on this section. Therefore, SBA is adopting the remainder of this section as proposed.

M. Section 134.102—Jurisdiction of OHA. SBA proposed to amend § 134.102(d), which is currently reserved, to provide OHA jurisdiction to hear appeals on enforcement actions against 7(a) Lenders, as contemplated by the Act. Such jurisdiction does not include appeals for certain actions against SBA Supervised Lenders under § 120.1500(c) and (d) or § 120.465 (including, but not limited to, Cease and Desist Orders, Suspensions, and Revocations). Procedures for those actions are provided for separately in 15 U.S.C. 650 and 13 CFR 120.1600(b) and (c) and 120.465 as discussed above. SBA received no comments specific to § 134.102 jurisdiction. Therefore, SBA is adopting the regulation as proposed, with revisions to clarify that it is the final agency decision on a formal enforcement action (as opposed to a notice of proposed enforcement action or immediate suspension) that may be appealable.

N. Section 134.205—The appeal file, confidential information, and protective orders. Section 134.205 governs the appeal file, confidential information, and protective orders when an action is appealed to OHA. Paragraph (c) lists types of information in the appeal file that are exempt from public access. The exempt information includes, but is not limited to, sensitive, confidential and other exempt information. SBA proposed to add to the list of exempt information, “documents and information covered under § 120.1060 of this title”. SBA received no comments on this section. SBA is adopting the section as proposed.

O. Part 134—Further Revisions. The proposed rule stated that any further revision to part 134, if needed, would be contained in a separate rulemaking. Eighteen commenters contended that in order to appropriately implement the statutory provision giving lenders the right to appeal enforcement actions to either the appropriate Federal district court or to SBA's OHA, it is recommended that SBA immediately begin the process to promulgate regulations to implement the statutory OHA appeal process. The commenters further claimed that additional regulations are necessary to provide guidance and to clarify the logistics of the OHA appeal process. SBA has considered the comments and determined that, at this time, the appeal provisions in §§ 120.1600 and 134.102, along with OHA's general rules of practice contained in 13 CFR 134.201 through 134.229, provide a sufficient framework for the appeal process for 7(a) Lenders. If SBA determines that there is a need for further amendment, SBA will promulgate regulations.

This final rule implements a proposed rule that the Office of Management and Budget (OMB) determined was not a “significant” regulatory action for the purposes of Executive Order 12866. Although it was not required, in the interest of transparency SBA included a Regulatory Impact Analysis (“RIA”) in the proposed rule. See 84 FR 29092, 29096 (June 21, 2019). The non-significant designation has not changed for this final rule; it is therefore unnecessary to reiterate the RIA. This is also not a major rule under the Congressional Review Act, 5 U.S.C. 801 et seq.

Executive Order 13563 supplements and reaffirms the principles and requirements of Executive Order 12866, including providing the public notice and an opportunity to comment on regulatory changes. During 2019, the Agency participated in 16 public forums and meetings that included outreach to hundreds of its lending partners from which it gained valuable insight for the program. These forums included, but were not limited to, the National Association of Government Guaranteed Lenders Technical and Annual Conferences; the National Association for Development Companies Conference; the Southeast Regional Lenders' Conference; the America East Lenders Conference; the Florida Association of Government Guaranteed Lenders' Conference, the Great Lakes Lenders' Conference; and the Mid-America Lenders' Conference. Feedback received during these events, in addition to the comments in response to the proposed rule, helped to inform the final regulations.

This action meets applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action does not have retroactive or preemptive effect.

SBA has determined that this final rule will not have substantial, direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, for the purposes of Executive Order 13132, SBA has determined that this final rule has no federalism implications warranting preparation of a federalism assessment.

This final rule is not subject to Executive Order 13771 because the rule is not significant under Executive Order 12866.

SBA has determined that this final rule will not impose additional recordkeeping or reporting requirements under the Paperwork Reduction Act (“PRA”). The only provision relating to recordkeeping is the revision to § 120.180, in which SBA clarifies that SBA Lenders and Intermediaries must maintain documentation to support compliance with SBA Loan Program Requirements. Recordkeeping requirements associated with this provision are covered by currently approved information collections for SBA's business loan programs, including but not limited to, collections under OMB Control Numbers 3245-0071, Application for Section 504 Loan (SBA Forms 1244 and 2450); 3245-0074, Certified Development Company (CDC) Annual Report Guide (SBA Form 1253); 3245-0080 and 0178, Statement of Personal History (SBA Forms 1081 and 912); 3245-0131, Transaction Report on Loans Serviced by Lender (SBA Form 172); 3245-0132, Lender's Transcript of Account (SBA Form 1149); 3245-0201, Compensation Agreement (SBA Form 159); 3245-0346, PCLP Quarterly Loan Loss Reserve Report and PCLP Guarantee Request (SBA Forms 2233 and 2234 Parts A, B, and C); 3245-0348, Borrower Information Form (SBA Form 1919), Lenders Application for Guaranty (SBA Form 1920), Religious Eligibility Worksheet (SBA Form 1971), 7(a) Loan Post Approval Action Checklist (SBA Form 2237); 3245-0352, Microloan Program Electronic Reporting System (MPERS) (MPERsystem); and 3245-0365, SBA Lender, Microloan Intermediary and NTAP Reporting Requirements. Prudent lenders should already be maintaining such documentation.

When an agency issues a proposed rulemaking, the Regulatory Flexibility Act (“RFA”), 5 U.S.C. 601-612, requires the agency to “prepare and make available for public comment an initial regulatory analysis” which will “describe the impact of the proposed rule on small entities.” Section 605 of the RFA allows an agency to certify a rule, in lieu of preparing an analysis, if the rulemaking is not expected to have a significant economic impact on a substantial number of small entities.

In the proposed rule, SBA certified that the rulemaking would not have a significant economic impact on a substantial number of small entities. SBA invited comment from the public on that certification. SBA received one short comment specific to economic impact. That comment, however, primarily addressed 7(a) program requirements in general rather than those contained in the proposed rule. No other comments were received on that topic.

The changes to current regulations in the final rule would generally fall into one of two categories: (i) Technical amendments/clarifications, or (ii) codifications of the new legislation or existing practices. Examples of the technical amendments and clarifications include the change to: The definition for Federal Financial Institution Regulator in § 120.10 to delete reference to the Office of Thrift Supervision, which was merged into other Federal banking agencies; the removal of references to NTAPs in §§ 120.1000, 120.1010, 120.1015, 120.1025, 120.1050, 120.1051, 120.1055, 120.1060, 120.1425, 120.1540, and 120.1600 as SBA has not issued technical assistance grants to NTAPs in many years and such assistance is being administered directly by Microloan Intermediaries; and the incorporation into § 120.180 of the current requirement that Intermediaries must comply with the Microloan Program requirements.

Although the technical corrections/clarifications portion of the final rule might affect some of the approximately 3,500 7(a) Lenders (approximately 2000 of which are small); 209 CDCs (all of which are small); and 147 Microloan Intermediaries (all of which are small), SBA does not believe the technical corrections and clarifications in the final rule will have a significant economic impact on those small entities. Rather, the clarifications to some extent might reduce the burdens by better informing SBA Lenders and Intermediaries of how the Agency may apply a regulation or requirement. As such, SBA Lenders and Intermediaries may potentially avoid the need to spend extra time and resources interpreting the regulations.

The second category consists of regulatory changes that codify or implement the new legislation or existing practices. Examples of the regulatory changes that codify or implement the new legislation include: The incorporation of the new statutory definition for credit elsewhere in § 120.101; the revision to the timeframe from 30 calendar days to 45 business days for an SBA Lender or Intermediary to respond to findings and corrective actions in § 120.1055; the inclusion of an OHA appeal for a 7(a) Lender enforcement action in §§ 120.1300, 120.1600, and 134.102; and the addition of CMPs for a 7(a) Lender in § 120.1500(b). Examples of regulatory changes that codify current practices and procedures include: The addition of a timeframe (90 days) for implementation of corrective actions in § 120.1055; the inclusion of voluntary agreements and Board Resolutions as informal enforcement actions in § 120.1300; and the adoption of the same grounds for informal as formal enforcement actions for an SBA Lender in § 120.1400.

While a few of the codifying provisions might have the potential of a significant economic impact, SBA does not expect them to impact a substantial number of small businesses. In particular, SBA does not consider the changes to the enforcement regulations, including the incorporation of a CMP for 7(a) Lenders in § 120.1500(b), to be burdensome to a substantial number of small lenders. This is because SBA has historically taken only a small number of enforcement actions, in part because the Agency initially seeks to educate and work with SBA Lenders and Intermediaries using graduated processes for the entity to reduce risk and come into compliance before taking any enforcement action. Specifically, SBA educates SBA Lenders and Intermediaries on SBA Loan Program Requirements through notices, webinar and teleconference training venues, and at conferences. In addition, when SBA identifies risk or noncompliance through monitoring or reviews, SBA generally seeks to work with the SBA Lender or Intermediary through the corrective action process or increased supervision to address SBA concerns. As a result, most SBA Lenders and Intermediaries come into compliance and avoid facing enforcement actions. SBA generally takes enforcement action only when the entity cannot sufficiently reduce risk, cannot correct serious noncompliance, or does not have the willingness or ability to correct. In FY 2019, SBA took five enforcement or other related actions against SBA Lenders and Intermediaries, which is not a substantial number.

One of the final rule changes to SBA's current enforcement regulations is the implementation of the statutory authority to charge a CMP. The CMP provisions are applicable only to 7(a) Lenders and by statute can be assessed in an enforcement action up to $250,000. The CMP provisions in the final rule provide flexibility to allow SBA to take into account factors, including the financial resources of a 7(a) Lender (especially for small lenders), in determining whether and in what amount to assess a CMP. SBA believes that the CMP provisions will not have a significant economic impact on a substantial number of small 7(a) Lenders, as most 7(a) Lenders generally comply with SBA Loan Program Requirements and given that only five enforcement or other related actions were taken against 7(a) Lenders in FY2019. In FY 2020, SBA does not anticipate that it will need to assess CMPs with any frequency. Further, given the flexibility in determining the amount of the penalty, even if imposed, the proposed penalty could be assessed in an amount much less than $250,000.

For the reasons stated above, SBA certifies that this final action will not have a significant economic impact on a substantial number of small entities.

For the reasons stated in the preamble, SBA is amending 13 CFR parts 120 and 134 as follows:

Discussion

The EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2019-0265, dated October 25, 2019 (“EASA AD 2019-0265”) (also referred to as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Airbus SAS Model A350-941 and -1041 airplanes.

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Airbus SAS Model A350-941 and -1041 airplanes. The NPRM published in the Federal Register on December 13, 2019 (84 FR 68063). The NPRM was prompted by a report of incorrectly engaged lock washer tabs of the MLG FPB at the forward face of the trunnion block. The NPRM proposed to require detailed inspections of the LH and RH side MLG FPB nuts and lock washer tabs, and depending on findings, accomplishment of repetitive detailed inspections or corrective actions, as specified in an EASA AD.

The FAA is issuing this AD to address absence of an engaged lock washer tab at the bearing nut, which could cause an unexpected rotation of the nut and loss of torque, progressively allowing an axial movement of the bearing housing. This condition, if not detected and corrected, could lead to collapse of a MLG, possibly resulting in damage to the airplane and/or injury to occupants. See the MCAI for additional background information.

The FAA gave the public the opportunity to participate in developing this final rule. The FAA has considered the comment received. Air Line Pilots Association, International (ALPA) indicated its support for the NPRM.

The FAA reviewed the relevant data, considered the comment received, and determined that air safety and the public interest require adopting this final rule as proposed, except for minor editorial changes. The FAA has determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM for addressing the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM.

EASA AD 2019-0265 describes procedures for detailed inspections of the LH and RH side MLG FPB nuts and lock washer tabs for any MLG FPB nut not correctly locked by the lock washer tab, and depending on findings, accomplishment of repetitive detailed inspections for discrepancies or corrective actions. Corrective actions include bending the washer tab to lock the bearing nut and replacing any parts that have damage or wear. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

The FAA estimates that this AD affects 12 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:

The FAA has received no definitive data that would enable us to provide cost estimates for the on-condition actions specified in this AD.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Will not affect intrastate aviation in Alaska, and

(3) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:

This AD is a final rule that involves requirements affecting flight safety, and the FAA did not provide you with notice and an opportunity to provide your comments prior to it becoming effective. However, the FAA invites you to participate in this rulemaking by submitting written comments, data, or views. The FAA also invites comments relating to the economic, environmental, energy, or federalism impacts that resulted from adopting this AD. The most helpful comments reference a specific portion of the AD, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should send only one copy of written comments, or if comments are filed electronically, commenters should submit them only one time. The FAA will file in the docket all comments received, as well as a report summarizing each substantive public contact with FAA personnel concerning this rulemaking during the comment period. The FAA will consider all the comments received and may conduct additional rulemaking based on those comments.

Transport Canada, which is the aviation authority for Canada, has issued Emergency AD No. CF-2019-15, dated April 26, 2019, to correct an unsafe condition for Bell Canada Model 429 helicopters, serial numbers 57001 through 57363. Transport Canada advises of a report of an improperly installed curvic coupling part number (P/N) 429-012-120-101. This was discovered during installation of the tail rotor (T/R) hub and blade assembly when the teeth of the curvic coupling rested on top of each other instead of meshing together. Transport Canada further advises that this condition may result in loosening of the T/R assembly and subsequent vibration and loss of drive to the outboard T/R blades, which will result in degraded directional control. Therefore, the Transport Canada Emergency AD requires inspecting the T/R and correcting any defective conditions, as well as reporting any anomalies to Bell Canada.

These helicopters have been approved by the aviation authority of Canada and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with Canada, Transport Canada, its technical representative, has notified the FAA of the unsafe condition described in the Transport Canada AD. The FAA is issuing this AD because it has evaluated all information provided by Transport Canada and determined the unsafe condition exists and is likely to exist or develop on other helicopters of the same type designs.

Bell has issued Alert Service Bulletin 429-19-45, dated April 16, 2019, for Model 429 helicopters, serial numbers 57001 through 57343, 57346 through 57349, 57352 through 57356, and 57362. This service information specifies inspecting the inboard and outboard curvic coupling teeth for proper engagement; inspecting for axial play between the inboard and outboard hub and blade assemblies; inspecting for play between the curvic coupling teeth and both inboard and outboard flapping bearing teeth; inspecting the curvic coupling teeth for damage; inspecting the inboard and outboard flapping bearing teeth for damage; installing a serviceable T/R hub and blade assembly; performing a rigging check of the directional control system; and reporting any anomalies to Bell Canada.

This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

This AD requires inspecting the curvic coupling teeth for proper engagement with the inboard and outboard flapping bearing teeth within 10 hours time-in-service (TIS).

If the teeth are not properly engaged, this AD requires removing the T/R hub and blade assembly and inspecting the curvic coupling teeth and the inboard and outboard flapping bearing teeth for a crack, wear, mechanical damage, and corrosion. Depending on the inspection results, this AD requires replacing parts. Then, with the T/R hub and blade assembly installed, this AD requires performing a rigging check of the directional control system.

If the teeth are properly engaged, this AD requires inspecting for axial play between both the inboard and outboard T/R hub and blade assemblies. If there is axial play, this AD requires performing the inspections for a crack, wear, mechanical damage, and corrosion. If there is no axial play, this AD requires inspecting for play between the teeth of the curvic coupling and both the inboard and outboard flapping bearing teeth, and if play exists, this AD requires performing the inspections for a crack, wear, mechanical damage, and corrosion.

Lastly, this AD requires emailing information about the inspection results that resulted in the replacement of parts to Bell Canada.

The Transport Canada Emergency AD requires reporting information within 3 days after the completion of the inspection, whereas this AD allows a compliance time of up to 10 days after completion of the inspection instead. This AD applies to fewer serial numbered Model 429 helicopters, listed in the applicability section, than the Transport Canada Emergency AD because certain serial numbered helicopters will have complied with the intent of this AD prior to delivery.

The requirements of the Regulatory Flexibility Act (RFA) do not apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt a rule without prior notice and comment. Because FAA has determined that it has good cause to adopt this rule without notice and comment, RFA analysis is not required.

The FAA estimates that this AD affects 88 helicopters of U.S. Registry. The FAA estimates that operators may incur the following costs in order to comply with this AD. Labor costs are estimated at $85 per work-hour.

Inspecting the curvic coupling teeth and the flapping bearing teeth for proper engagement requires about 0.5 work-hours for an estimated cost of $43 per helicopter and $3,784 for the U.S. fleet.

If required, removing and installing the T/R hub and blade assembly to inspect the curvic coupling teeth and the inboard and outboard flapping bearing teeth for a crack, wear, mechanical damage, and corrosion requires about 0.5 work-hours for an estimated cost of $43 per helicopter.

Replacing a curvic coupling requires about 0.5 work-hours and parts cost about $4,141 for an estimated cost of $4,184 per curvic coupling.

Replacing a flapping bearing requires about 0.5 work-hours and parts cost about $19,948 for an estimated cost of $19,991 per flapping bearing.

If required, reporting information takes about 1 work-hour for an estimated cost of $85 per helicopter.

A federal agency may not conduct or sponsor, and a person is not required to respond to, nor shall a person be subject to a penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act unless that collection of information displays a currently valid OMB Control Number. The OMB Control Number for this information collection is 2120-0056. Public reporting for this collection of information is estimated to be approximately 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. All responses to this collection of information are mandatory. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden to: Information Collection Clearance Officer, Federal Aviation Administration, 10101 Hillwood Parkway, Fort Worth, TX 76177-1524.

Section 553(b)(3)(B) of the Administrative Procedure Act (5 U.S.C.) authorizes agencies to dispense with notice and comment procedures for rules when the agency, for “good cause,” finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under this section, an agency, upon finding good cause, may issue a final rule without seeking comment prior to the rulemaking.

An unsafe condition exists that requires the immediate adoption of this AD without providing an opportunity for public comments prior to adoption. The FAA has found that the risk to the flying public justifies waiving notice and comment prior to adoption of this rule because the unsafe condition requires corrective action within 10 hours TIS. Accordingly, notice and opportunity for prior public comment are impracticable and contrary to public interest pursuant to 5 U.S.C. 553(b)(3)(B). In addition, for the reasons stated above, the FAA finds that good cause exists pursuant to 5 U.S.C. 553(d) for making this amendment effective in less than 30 days.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

The FAA determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed, I certify that this AD:

1. Is not a “significant regulatory action” under Executive Order 12866, and

2. Will not affect intrastate aviation in Alaska.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:

Discussion

The EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2019-0167, dated July 15, 2019 (“EASA AD 2019-0167”) (also referred to as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Airbus SAS Model A320-214, -232, and -271N airplanes, and Model A321-231 airplanes.

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Airbus SAS Model A320-214,-232, and -271N airplanes, and Model A321-231 airplanes. The NPRM published in the Federal Register on November 1, 2019 (84 FR 58634). The NPRM was prompted by report of a production line inspection finding of damage on a MLG side stay attachment outboard lug. Investigation results determined that the detected damage had been caused by using incorrect tooling, and identified a batch of affected parts that may have received the same treatment. The NPRM proposed to require an inspection for discrepancies of the MLG side stay attachment outboard lugs, left-hand and right-hand sides, and applicable corrective action as specified in an EASA AD.

The FAA is issuing this AD to address damaged MLG side stay attachment outboard lugs, which could reduce the structural integrity of the attachment of the MLG to the wing. See the MCAI for additional background information.

The FAA gave the public the opportunity to participate in developing this final rule. The FAA has considered the comments received. Air Line Pilots Association, International (ALPA) and Darcy Mraz support the intent of the NPRM.

The FAA reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting this final rule as proposed, except for minor editorial changes. The FAA has determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM for addressing the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM.

EASA AD 2019-0167 describes procedures for an inspection for discrepancies (cracks, wear, damage, and corrosion) of the MLG side stay attachment outboard lugs, left-hand and right-hand sides, and corrective action (repair). This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

The FAA estimates that this AD affects 1 airplane of U.S. registry. The FAA estimates the following costs to comply with this AD:

The FAA has received no definitive data that would enable the FAA to provide cost estimates for the on-condition actions specified in this AD.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Will not affect intrastate aviation in Alaska, and

(3) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:

Discussion

Transport Canada Civil Aviation (TCCA), which is the aviation authority for Canada, has issued Canadian AD CF-2019-31, dated September 6, 2019 (also referred to as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Airbus Canada Limited Partnership Model BD-500-1A11 airplanes. You may examine the MCAI in the AD docket on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-2019-0988.

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Airbus Canada Limited Partnership Model BD-500-1A11 airplanes. The NPRM published in the Federal Register on December 20, 2019 (84 FR 70078). The NPRM was prompted by reports that, under certain combinations of airplane configuration and flight conditions, higher than anticipated temperatures could lead to an engine fire warning nuisance message. The NPRM proposed to require installation of IASC software version 5.0. The FAA is issuing this AD to address this potential nuisance message, which could lead to an unnecessary shutdown of the engine by the flightcrew, and consequent reduced controllability of the airplane. See the MCAI for additional background information.

The FAA gave the public the opportunity to participate in developing this final rule. The FAA received no comments on the NPRM or on the determination of the cost to the public.

The FAA reviewed the relevant data and determined that air safety and the public interest require adopting this final rule as proposed, except for minor editorial changes. The FAA has determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM for addressing the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM.

Bombardier has issued Service Bulletin BD500-219001, Issue 002, dated September 11, 2018. This service information describes procedures for installation of IASC software version 5.0. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

The FAA estimates that this AD affects 8 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Will not affect intrastate aviation in Alaska, and

(3) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:

The Entity List (Supplement No. 4 to part 744 of the Export Administration Regulations (EAR)) identifies entities for which there is reasonable cause to believe, based on specific and articulable facts, that the entities have been involved, are involved, or pose a significant risk of being or becoming involved in activities contrary to the national security or foreign policy interests of the United States. The EAR (15 CFR parts 730-774) impose additional license requirements on, and limit the availability of most license exceptions for, exports, reexports, and transfers (in-country) to listed entities. The license review policy for each listed entity is identified in the “License review policy” column on the Entity List, and the impact on the availability of license exceptions is described in the relevant Federal Register notice adding entities to the Entity List. BIS places entities on the Entity List pursuant to part 744 (Control Policy: End-User and End-Use Based) and part 746 (Embargoes and Other Special Controls) of the EAR.

The End-User Review Committee (ERC), composed of representatives of the Departments of Commerce (Chair), State, Defense, Energy and, where appropriate, the Treasury, makes all decisions regarding additions to, removals from, or other modifications to the Entity List. The ERC makes all decisions to add an entry to the Entity List by majority vote and all decisions to remove or modify an entry by unanimous vote.

Under § 744.11(b) (Criteria for revising the Entity List) of the EAR, entities for which there is reasonable cause to believe, based on specific and articulable facts, that the entities have been involved, are involved, or pose a significant risk of being or becoming involved in activities that are contrary to the national security or foreign policy interests of the United States, and those acting on behalf of such entities, may be added to the Entity List. Paragraphs (b)(1) through (b)(5) of § 744.11 provide an illustrative list of activities that could be considered contrary to the national security or foreign policy interests of the United States.

This rule implements the decision of the ERC to add twenty-four entities to the Entity List. The twenty-four entities being added are located in China, Iran, Pakistan, Russia and the U.A.E. The ERC made the decision to add each of the twenty-four entities described below under the standard set forth in § 744.11(b) of the EAR.

The ERC determined to add Wuhan IRCEN Technology and Jalal Rohollahnejad, under the destination of China, for acting contrary to U.S. national security or foreign policy interests by procuring goods on behalf of Rayan Roshd Afzar Company, which has been designated by the U.S. Department of the Treasury as a Specially-Designated Nationals (SDN).

The ERC determined to add Iran Air under the destination of Iran, because the ERC determined that Iran Air has transported military-related equipment on behalf of Iran's Islamic Revolutionary Guard Corps (IRGC) and Ministry of Defense and Armed Forces Logistics (MODAFL). Additionally, Iran Air's facilitation of the Iranian regime's malign activities throughout the Middle East, particularly its history of support for IRGC operations in Syria on behalf of the Syrian regime, poses a threat to U.S. security and foreign policy interests. Iran Air also has a history of diverting spare aircraft parts intended for civil aviation to military-linked entities and for military purposes.

The ERC also determined to add Aref Bali Lashak, Kamran Daneshjou, Mehdi Teranchi, Ali Mehdipour Omrani, and Sayyed Mohammad Mehdi Hadavi under the destination of Iran, as the ERC determined that these individuals have been involved in nuclear-related activities that are contrary to the national security and/or foreign policy interests of the United States.

The ERC determined to add National Engineering Service Trading and Consultancy Company, Triton Educational Equipment & Consultancy Co., and Advance Multicom under the destination of Pakistan. The ERC determined that National Engineering Service Trading and Consultancy Company and Triton Educational Equipment & Consultancy Co. have contributed to unsafeguarded nuclear activities, and that Advance Multicom has been involved in the proliferation of unsafeguarded nuclear activities.

The ERC determined to add Kepler Corporation and Samina Pvt. Ltd. under the destination of Pakistan. The ERC determined to add Kepler Corporation and Samina Pvt. Ltd. to the Entity List due to their involvement in the proliferation of unsafeguarded nuclear activities contrary to the national security or foreign policy interests of the United States.

The ERC also determined to add United Engineering and Skytech Global Pvt. Ltd., under the destination of Pakistan, based upon their contributions to Pakistan's missile program.

The ERC determined to add SNTS Tech, under the destination of Pakistan, as this entity attempted to procure U.S.-origin items for entities in Pakistan that are on the Entity List.

The ERC determined to add to SANCO Pakistan, under the destination of Pakistan, and SANCO Middle East, FZC and SANCO Middle East, LLC, under the destination of the U.A.E., as these three entities have procured and attempted to procure U.S.-origin items for a listed entity in Pakistan.

The ERC determined to add Technomar and Avilon Ltd., under the destination of Russia, as these two entities are acting on behalf of a listed entity in circumvention of licensing requirements by procuring U.S.-origin items for Technopole Company, which was added to the Entity List on September 7, 2016 (81 FR 61601).

The ERC determined to add Focus Middle East and Wellmar Technology FZE, under the destination of the U.A.E., as there is reasonable cause to believe that these entities have conspired to transship U.S.-origin commodities to Iran without the required U.S. Government authorization.

The ERC determined to add Pegasus General Trading FZC, under the destination of the U.A.E., as this entity has made multiple attempts to acquire U.S.-origin commodities ultimately destined for Pakistan's unsafeguarded nuclear program, has provided false and misleading information to BIS during an end-use check, and has falsified official documents to obfuscate the true end-users of items subject to the EAR.

Pursuant to § 744.11(b), the ERC determined that the conduct of the above-described twenty-four entities raises sufficient concerns that prior review of exports, reexports, or transfers (in-country) of all items subject to the EAR involving these entities, and the possible imposition of license conditions or license denials on shipments to these entities, will enhance BIS's ability to prevent violations of the EAR. For the twenty-four entities added to the Entity List in this final rule, BIS imposes a license requirement for all items subject to the EAR. For twenty of the twenty-four entities added to the Entity List in this final rule—Jalal Rohallahnejad, Wuhan IRCEN Technology, Aref Bali Lashak, Ali Mehdipour Omrani, Kamran Daneshjou, Mehdi Teranchi, Sayyed Mohammad Mehdi Hadavi, Kepler Corporation, Samina Pvt. Ltd., SANCO Pakistan, Skytech Global Pvt. Ltd., SNTS Tech, United Engineering, Avilon Ltd., Technomar, Focus Middle East, Pegasus General Trading FZC, SANCO Middle East FZC, SANCO Middle East LCC, and Wellmar Technology FZE—BIS imposes a license review policy of a presumption of denial. For Iran Air, the license review policy imposed by BIS is case-by-case review for licenses for the safety of civil aviation and the safe operation of aircraft; presumption of denial for all others. For National Engineering Service Trading and Consultancy Company, Triton Educational Equipment & Consultancy Co, and Advance Multicom, BIS imposes the license review policy set forth in § 744.2(d) of the EAR, a nuclear end-user and end-use based provision. In addition, no license exceptions are available for exports, reexports, or transfers (in-country) to the persons being added to the Entity List in this rule. The acronym “a.k.a.” (also known as) is used in entries on the Entity List to identify aliases, thereby assisting exporters, reexporters, and transferors in identifying entities on the Entity List.

For the reasons described above, this final rule adds the following twenty-four entities to the Entity List:

• Jalal Rohollahnejad; and

• Wuhan IRCEN Technology.

• Aref Bali Lashak;

• Ali Mehdipour Omrani;

• Iran Air;

• Kamran Daneshjou;

• Mehdi Teranchi; and

• Sayyed Mohammad Mehdi Hadavi.

• Advance Multicom;

• Kepler Corporation;

• National Engineering Service Trading and Consultancy Co.;

• Samina Pvt. Ltd.;

• SANCO Pakistan;

• Skytech Global Pvt. Ltd.;

• SNTS Tech.;

• Triton Educational Equipment & Consultancy Co.; and

• United Engineering.

• Avilon Ltd.

• Technomar, including one alias (Tehnomar); and

• Focus Middle East;

• Pegasus General Trading FZC, including six aliases (Pegasus General Trading FZE; Pegasus General Trading Company; Pegasus General Trading LLC; Pegasus General; Pegasus Trading; and Pegasus);

• SANCO Middle East, FZC, including one alias (SANCO ME FZC);

• SANCO Middle East, LLC, including one alias (SANCO ME, LLC); and

• Wellmar Technology FZE.

This final rule revises five existing entries, one under each of the destinations of France, Iran, Senegal, Singapore and the United Kingdom (U.K.), as follows:

This rule implements a revision to three existing entries for Dart Aviation, first added to the Entity List under the destinations of France, Iran, Senegal, and the U.K. on November 13, 2019 (84 FR 61541). BIS is revising the existing entries under France, Iran, and the U.K., by correcting the spelling of the first word of the alias, “Sari IAEA” to “SARL IEAS.”

This rule implements a revision to one existing entry for EDO-ELEMED, which was first added to the Entity List under the destinations of Lebanon and Syria, on November 13, 2019 (84 FR 61541). BIS is revising the existing entry under Lebanon by correcting the spelling of the aliases and removing redundant text.

This rule revises the existing entry for Hia Soo Gan Benson, which was first added to the Entity List, under the destination of Singapore, on October 31, 2011 (76 FR 67062). BIS is revising the first alias of the existing entry to include the full name of “Benson Hia” instead of only referencing “Benson.”

Shipments of items removed from eligibility for a License Exception or export or reexport without a license (NLR) as a result of this regulatory action that were en route aboard a carrier to a port of export or reexport, on March 16, 2020, pursuant to actual orders for export or reexport to a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export or reexport without a license (NLR).

On August 13, 2018, the President signed into law the John S. McCain National Defense Authorization Act for Fiscal Year 2019, which included the Export Control Reform Act of 2018 (ECRA) (50 U.S.C. 4801-4852). ECRA provides the legal basis for BIS's principal authorities and serves as the authority under which BIS issues this rule. As set forth in Section 1768 of ECRA, all delegations, rules, regulations, orders, determinations, licenses, or other forms of administrative action that were made, issued, conducted, or allowed to become effective under the Export Administration Act of 1979 (50 U.S.C. 4601 et seq. ) (as in effect on August 12, 2018, and as continued in effect pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq. )) or under the Export Administration Regulations, and were in effect as of August 13, 2018, shall continue in effect according to their terms until modified, superseded, set aside, or revoked under the authority of ECRA.

1. Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been determined to be not significant for purposes of Executive Order 12866. This rule is not an Executive Order 13771 regulatory action because this rule is not significant under Executive Order 12866.

2. Notwithstanding any other provision of law, no person is required to respond to nor be subject to a penalty for failure to comply with a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ) (PRA), unless that collection of information displays a currently valid Office of Management and Budget (OMB) Control Number. This regulation involves collections previously approved by OMB under control number 0694-0088, Simplified Network Application Processing System, which includes, among other things, license applications and carries a burden estimate of 42.5 minutes for a manual or electronic submission. Total burden hours associated with the PRA and OMB control number 0694-0088 are not expected to increase as a result of this rule. You may send comments regarding the collection of information associated with this rule, including suggestions for reducing the burden, to Jasmeet K. Seehra, Office of Management and Budget (OMB), by email to Jasmeet_K._Seehra@omb.eop.gov, or by fax to (202) 395-7285.

3. This rule does not contain policies with Federalism implications as that term is defined in Executive Order 13132.

4. Pursuant to § 1762 of the Export Control Reform Act of 2018 (50 U.S.C. 4801-4852), which was included in the John S. McCain National Defense Authorization Act for Fiscal Year 2019, this action is exempt from the Administrative Procedure Act (5 U.S.C. 553) requirements for notice of proposed rulemaking, opportunity for public participation, and delay in effective date.

5. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule by 5 U.S.C. 553, or by any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., are not applicable. Accordingly, no regulatory flexibility analysis is required and none has been prepared.

Accordingly, part 744 of the Export Administration Regulations (15 CFR parts 730-774) is amended as follows:

The Coast Guard will enforce the safety zone located in 33 CFR 165.845 for the Viking Cruise Lines—Paradigm Fireworks Display event from 8:30 p.m. to 10 p.m. on April 7, 2020. This action is being taken to provide for the safety of life on navigable waterways during this event, which will be located between MM 95.6 and MM 96.6 above Head of Passes, Lower Mississippi River, LA. During the enforcement periods, if you are the operator of a vessel in the regulated area you must comply with directions from the Patrol Commander or any Official Patrol displaying a Coast Guard ensign.

In addition to this notice of enforcement in the Federal Register , the Coast Guard plans to provide notification of this enforcement period via a Marine Safety Information Bulletin and Broadcast Notice to Mariners.

On June 26, 2019, VA published a proposed rule in the Federal Register (84 FR 30060), which would amend the Family SGLI definition of the term “member's stillborn child.” VA provided a 60-day comment period on the proposed rule, which ended on August 26, 2019. VA received more than 300 comments, all of which supported the rulemaking. However, forty-two of the comments, while supporting the proposed rule, included suggestions to revise the proposed rule. VA has organized the issues raised by these commenters by topic.

Some commenters stated that the final rule should eliminate weight and gestation requirements and cover all stillbirths, while other commenters suggested eliminating the weight requirement in the rule. When section 402 of the Veterans' Benefits Improvement Act of 2008, Public Law 110-389, 122 Stat. 4145, 4174, was enacted, authorizing Family SGLI for a “member's stillborn child,” Congress indicated that Family SGLI coverage is not intended to cover all stillborn children. Rather, S. Rep. No. 110-449, at 41 (2008), stated that the Senate “Committee [on Veterans' Affairs] expects VA to . . . define the term [“member's stillborn child”] . . . consistent with the 1992 recommended reporting requirements” of fetal deaths of the Model State Vital Statistics Act and Regulations as drafted by the Centers for Disease Control and Prevention's National Center for Health Statistics. The Model Act recommends a state reporting requirement of fetal deaths involving fetuses weighing 350 grams or more, or if weight is unknown, of 20 completed weeks or more of gestation, calculated from the date the last normal menstrual period began to the date of delivery. Model Act section 15. A regulatory definition of “member's stillborn child” that contains no weight and/or gestational requirements would be inconsistent with Congressional intent. VA therefore will not make any changes based on these comments.

Ten commenters stated that the final rule should provide insurance coverage for stillbirths occurring before promulgation of this regulation. The Administrative Procedure Act generally contemplates rulemaking to apply prospectively, and the term “rule” is defined at 5 U.S.C. 551(4) to mean, in pertinent part, “an agency statement of general or particular applicability and future effect.” It is well-settled that agencies generally lack authority to issue retroactive regulations to implement a new policy absent an express statutory grant of such authority. Although agencies must be free to make and change policies within the boundaries established by Congress, Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 863-64 (1984), the Supreme Court has held that “[r]etroactivity is not favored in the law. Thus, congressional enactments and administrative rules will not be construed to have retroactive effect unless their language requires this result.” Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988).

Further, “a statutory grant of legislative rulemaking authority will not, as a general matter, be understood to encompass the power to promulgate retroactive rules unless the power is conveyed by Congress in express terms.” Id. “'The standard for finding such unambiguous direction is a demanding one.'” Bernklau v. Principi, 291 F.3d 795, 805 (Fed. Cir. 2002) (quoting Immigration & Naturalization Serv. v. St. Cyr, 533 U.S. 289, 316-317 (2001)). For example, in Liesegang v. Secretary of Veterans Affairs, 312 F.3d 1368, 1377 n.1 (Fed. Cir. 2002), the U.S. Court of Appeals for the Federal Circuit stated that “settled and binding precedent” precluded the court from giving retroactive effect to a VA regulation creating a presumption of service connection for type-2 diabetes for Vietnam veterans exposed to herbicides. The court stated that 38 U.S.C. 1116, which authorized the regulation at issue, did not contain “express and unambiguous permission” for VA to promulgate a retroactive regulation. Id.

VA declines to make this amendment to section 9.1(k)(1) retroactive for the following reasons. VA promulgated 38 CFR 9.1(k)(1) pursuant to 38 U.S.C. 501(a), which provides the Secretary of Veterans Affairs with the authority to prescribe all “necessary” and “appropriate” rules, including interpretative rules, to carry out the laws administered by the VA. That statute contains no express and unambiguous permission to issue retroactive regulations or policies.

Assuming arguendo that VA's rulemaking authority under section 501(a) extends to assigning a retroactive effective date in the abstract, doing so would be inconsistent with VA's usual and longstanding practice to make substantive regulations effective prospectively. E.g. 83 FR 53179 (Oct. 22, 2018); McKinney v. McDonald, 796 F.3d 1377, 1384-85 (Fed. Cir. 2015) (VA did not act unreasonably in using prospective effective date for liberalization regulation). This policy “helps ensure that all new liberalizing regulations are applied in a fair and consistent manner” and “serves the interests of orderly administration and clarity in the law.” 83 FR 53179. A retroactive effective date for this regulation would also be inconsistent with Congress' approach in enacting title-38 statutes, including statutes authorizing Family SGLI and providing Family SGLI coverage for stillborn children. Veterans' Survivor Benefits Improvements Act of 2001, Public Law 107-14, 4(g), 115 Stat. 25, 30 (making Family SGLI effective on first day of first month that begins more than 120 days after enactment of Act); Public Law 110-389, 402, 122 Stat. 4174. VA will therefore make the amendment to section 9.1(k)(1) effective on the date of publication of this final-rule notice, and the rule will be applicable to stillbirths occurring on or after that date.

One commenter suggested that the final rule should cover medical expenses related to any type of pregnancy or delivery. Section 1967(a)(1) of title 38, United States Code, provides automatic SGLI coverage on the life of an insured's dependent spouse or children. The statute does not authorize reimbursement of medical expenses, including those related to pregnancy or delivery. Therefore, VA will not make any changes based on this comment.

One commenter expressed support and appreciation for the proposal to extend coverage to situations where fetal weight is less than 350 grams. The comment seems to suggest that an aborted fetus could qualify as a “stillborn child” absent the change caused by this final rule. We note that when VA promulgated 38 CFR 9.1(k) in 2009 to define “member's stillborn child,” we specifically excluded, in paragraph (k)(2), a fetus or child extracted for purposes of an abortion from the definition. VA explained that this exclusion was consistent with Congressional intent that VA issue implementing regulations that define the term “stillborn child” consistent with the 1992 recommended reporting requirements of the Model State Vital Statistics Act and Regulations. 74 FR 59748 (Nov. 18, 2009). The Model Act recommends a state reporting requirement of fetal deaths involving fetuses weighing 350 grams or more, or if weight is unknown, of 20 completed weeks or more of gestation, calculated from the date the last normal menstrual period began to the date of delivery. Id.; Model Act section 15. In addition, the Model Act defines “fetal death” to mean “death prior to the complete expulsion or extraction from its mother of a product of human conception, irrespective of the duration of pregnancy and which is not an induced termination of pregnancy.” Id.; Model Act section (1)(b). VA has not proposed amending current 38 CFR 9.1(k)(2), which provides that the term “member's stillborn child” does not include any fetus or child extracted for purposes of an abortion. Therefore, VA will not make changes based on this comment.

Based on the rationale set forth in the Supplementary Information to the proposed rule and in this final rule, VA adopts the proposed rule, without change, as a final rule.

The Secretary of Veterans Affairs finds that there is good cause under 5 U.S.C. 553(d)(1) and (d)(3) to publish this rule with an immediate effective date rather than 30 days after publication. This rule relieves a restriction on coverage for a member's stillborn child. The rule will be beneficial to servicemembers and their families and was uniformly supported by the public comments we received. Making the rule effective immediately will allow Family SGLI to be paid to servicemembers for stillbirths that qualify under the liberalizing amendment to § 9.1(k) and may occur within the 30-day period following publication.

This final rule contains no provisions constituting a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521).

The Secretary hereby certifies that the adoption of this final rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. Family SGLI is part of the SGLI policy purchased by the Secretary of Veterans Affairs from Prudential Insurance Company of America. 38 U.S.C. 1966(a). Premiums for Family SGLI are deducted from servicemembers' basic pay or other pay by the Secretary of each uniformed service. 38 U.S.C. 1969(a). The Office of Servicemembers' Group Life Insurance, the administrative office established by Prudential pursuant to 38 U.S.C. 1966(b), administers Family SGLI, decides claims, and pays out proceeds. As a result, this rulemaking will not directly affect small entities. Therefore, pursuant to 5 U.S.C. 605(b), the initial and final regulatory flexibility analysis requirements of 5 U.S.C. 603 and 604 do not apply.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. The Office of Information and Regulatory Affairs has determined that this rule is not a significant regulatory action under Executive Order 12866. VA's impact analysis can be found as a supporting document at http://www.regulations.gov, usually within 48 hours after the rulemaking document is published. Additionally, a copy of the rulemaking and its impact analysis are available on VA's website at http://www.va.gov/orpm by following the link for VA Regulations Published from FY 2004 Through Fiscal Year to Date.

This rule is not an E.O. 13771 regulatory action because this rule is not significant under E.O. 12866.

The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any 1 year. This final rule will have no such effect on State, local, and tribal governments, or on the private sector.

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq. ), the Office of Information and Regulatory Affairs has determined that this rule is not a “major rule” as defined by 5 U.S.C. 804(2).

The Catalog of Federal Domestic Assistance number and title for the program affected by this document is 64.103, Life Insurance for Veterans.

The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. Pamela Powers, Chief of Staff, Department of Veterans Affairs, approved this document on February 25, 2020, for publication.

For the reasons set forth in the preamble VA amends 38 CFR part 9 as follows:

The Atlantic shark fisheries are managed under the 2006 Consolidated Highly Migratory Species (HMS) Fishery Management Plan (FMP), its amendments, and implementing regulations (50 CFR part 635) issued under authority of the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 1801 et seq. ).

Under § 635.5(b)(1), dealers must electronically submit reports on sharks that are first received from a vessel on a weekly basis through a NMFS-approved electronic reporting system. Reports must be received by no later than midnight, local time, of the first Tuesday following the end of the reporting week unless the dealer is otherwise notified by NMFS. Under § 635.28(b)(4), the quotas of certain species and/or management groups are linked. If quotas are linked, when the specified quota threshold for one management group or species is reached and that management group or species is closed, the linked management group or species closes at the same time (§ 635.28(b)(3)). The quotas for the aggregated LCS and hammerhead shark management groups in the western Gulf of Mexico sub-region are linked (§ 635.28(b)(4)(iii)).

Under § 635.28(b)(3), when NMFS calculates that the landings for any linked species and/or management group have reached or are projected to reach a threshold of 80 percent of the available quota, and are projected to reach 100 percent of the relevant quota by the end of the fishing season, NMFS will file for publication with the Office of the Federal Register a notice of an overall, regional, and/or sub-regional closure, as applicable, for the linked species and/or management groups that will be effective no fewer than 4 days from date of filing. From the effective date and time of the closure until and if NMFS announces, via a notice in the Federal Register, that additional quota is available and the season is reopened, the fisheries for all linked species and/or management groups are closed, even across fishing years.

On November 29, 2019 (84 FR 65690), NMFS announced that for 2020, the commercial western Gulf of Mexico aggregated LCS sub-regional quota was 72.0 mt dw (158,724 lb dw) and the western Gulf of Mexico hammerhead sharks sub-regional quota was 11.9 mt dw (26,301 lb dw). Dealer reports received through March 5, 2020, indicate that 79 percent (56.9 mt dw) of the available western Gulf of Mexico aggregated LCS management group sub-regional quota has been landed and that less than 1 percent (<1.0 mt dw) of the available western Gulf of Mexico hammerhead sharks sub-regional quota has been landed. Based on these dealer reports, the western Gulf of Mexico aggregated LCS management group sub-regional quota is projected to exceed 80 percent of the available quota very soon and is projected to exceed 100 percent of the available quota before the end of the fishing season. Thus, NMFS has determined that a closure of the commercial western Gulf of Mexico aggregated LCS fishery is warranted at this time. While the western Gulf of Mexico hammerhead shark sub-regional quota has reached less than 1 percent of the available quota, it is linked to the aggregated LCS fishery, and therefore, closes when the aggregated LCS management group in the western Gulf of Mexico sub-region closes. Accordingly, NMFS is closing the commercial aggregated LCS and hammerhead shark management groups in the western Gulf of Mexico sub-region as of 11:30 p.m. local time March 14, 2020.

All other shark species or management groups in the western Gulf of Mexico sub-region that are currently open will remain open, including the commercial blacktip sharks, non-blacknose small coastal sharks, blue sharks, smoothhound sharks, and pelagic sharks other than porbeagle or blue sharks.

The boundary between the Gulf of Mexico region and the Atlantic region is defined at § 635.27(b)(1) as a line beginning on the East Coast of Florida at the mainland at 25°20.4′ N lat, proceeding due east. Any water and land to the south and west of that boundary is considered for the purposes of monitoring and setting quotas, to be within the Gulf of Mexico region. The boundary between the western and eastern Gulf of Mexico sub-regions is drawn along 88° 00′ W long (§ 635.27(b)(1)(ii)). Persons fishing aboard vessels issued a commercial shark limited access permit (LAP) under § 635.4 may still retain sharks in the aggregated LCS and/or hammerhead shark management groups in the eastern Gulf of Mexico sub-region (east of 88° 00′ W long).

During the closure, retention of sharks in the aggregated LCS and/or hammerhead shark management groups in the western Gulf of Mexico sub-region is prohibited for persons fishing aboard vessels issued a commercial shark LAP under § 635.4. However, persons aboard a commercially permitted vessel that is also properly permitted to operate as a charter vessel or headboat for HMS, has a shark endorsement, and is engaged in a for-hire trip could fish under the recreational retention limits for sharks and “no sale” provisions (§ 635.22(c)). Similarly, persons aboard a commercially permitted vessel that possesses a valid shark research permit under § 635.32 may continue to harvest and sell aggregated LCS and/or hammerhead sharks in the western Gulf of Mexico sub-region pursuant to the terms and conditions of the shark research permit, if a NMFS-approved observer is onboard and the shark research fishery, as applicable, is open.

During this closure, a shark dealer issued a permit pursuant to § 635.4 may not purchase or receive aggregated LCS and/or hammerhead sharks in the western Gulf of Mexico sub-region from a vessel issued an Atlantic shark LAP, except that a permitted shark dealer or processor may possess aggregated LCS and/or hammerhead sharks in the western Gulf of Mexico sub-region that were harvested, off-loaded, and sold, traded, or bartered prior to the effective date of the closure and were held in storage consistent with § 635.28(b)(6). Additionally, a permitted shark dealer may possess aggregated LCS and/or hammerhead sharks in the western Gulf of Mexico sub-region that were harvested by a vessel issued a valid shark research fishery permit per § 635.32 with a NMFS-approved observer onboard during the trip the sharks were taken on as long as the LCS research fishery quota remains open. Similarly, a shark dealer issued a permit pursuant to § 635.4 may, in accordance with relevant State regulations, purchase or receive aggregated LCS and/or hammerhead sharks in the western Gulf of Mexico sub-region if the sharks were harvested, off-loaded, and sold, traded, or bartered from a vessel that fishes only in State waters and that has not been issued an Atlantic Shark LAP, HMS Angling permit, or HMS Charter/Headboat permit pursuant to § 635.4.

Pursuant to 5 U.S.C. 553(b)(B), the Assistant Administrator for Fisheries, NOAA (AA), finds that providing prior notice and public comment for this action is impracticable and contrary to the public interest because the fishery is currently underway and any delay in this action would result in overharvest of the quotas for these species and management groups and thus would be inconsistent with fishery management requirements and objectives. The regulations implementing the 2006 Consolidated HMS FMP and amendments provide for inseason retention limit adjustments and fishery closures to respond to the unpredictable nature of availability on the fishing grounds, the migratory nature of the species, and the regional variations. NMFS is not able to give notice sooner nor would sooner notice be practicable given the structure of the regulations, which close the fisheries under specified regulatory criteria or thresholds, and closure determinations need to be based on near real-time data to balance fishing opportunities against the management goal of preventing quota overharvests. Similarly, affording prior notice and opportunity for public comment on this action is contrary to the public interest because if a quota is exceeded, the stock may be negatively affected and fishermen ultimately could experience reductions in the available quota and a lack of fishing opportunities in future seasons. For these reasons, the AA also finds good cause to waive the 30-day delay in effective date pursuant to 5 U.S.C. 553(d)(3). This action is required under § 635.28(b)(3) and § 635.28(b)(4) and is exempt from review under Executive Order 12866.

NMFS manages the groundfish fishery in the GOA exclusive economic zone according to the Fishery Management Plan for Groundfish of the Gulf of Alaska (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.

The B season allowance of the 2020 total allowable catch (TAC) of pollock in Statistical Area 630 of the GOA is 2,318 metric tons (mt) as established by the final 2020 and 2021 harvest specifications for groundfish in the GOA (85 FR 13802, March 10, 2020).

In accordance with § 679.20(d)(1)(i), the Regional Administrator has determined that the B season allowance of the 2020 TAC of pollock in Statistical Area 630 of the GOA will soon be reached. Therefore, the Regional Administrator is establishing a directed fishing allowance of 1,800 mt and is setting aside the remaining 518 mt as bycatch to support other anticipated groundfish fisheries. In accordance with § 679.20(d)(1)(iii), the Regional Administrator finds that this directed fishing allowance has been reached. Consequently, NMFS is prohibiting directed fishing for pollock in Statistical Area 630 of the GOA.

While this closure is effective the maximum retainable amounts at § 679.20(e) and (f) apply at any time during a trip.

This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the closure of directed fishing for pollock in Statistical Area 630 of the GOA. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of March 10, 2020.

The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.

This action is required by § 679.20 and is exempt from review under Executive Order 12866.